According to founder and CEO Joe Kudla, Vuori doesn't need the $400 million it just raised in order to execute on its growth strategy.
"Most of this money is going to reward early shareholders that believed in the vision from day one," Kudla told Retail Dive.
Vuori was launched in 2015, with a strategic focus on men's. Kudla wanted to make activewear clothing that he "actually wanted to wear" rather than what the mainstream brands were offering. Vuori's focus was on versatile clothing that could be worn for a workout followed by an errand around town.
"Lululemon launched, obviously, very successfully. They were growing, they were showing up in the yoga classes I was going to, but they were really focused on women and it always felt like it was my wife's brand," Kudla said.
Hence, Vuori's initial focus on men. Women's would launch in 2018, and now the brand's gender mix is evenly split, according to Kudla.
Of course, Vuori isn't as well known as Lululemon is today, but the brand attracted attention earlier this month when it announced the closing of $400 million in funding, four times higher than some of the biggest funding rounds from other DTC darlings like Allbirds and Glossier.
While much of the money is going to shareholders, that isn't to say Vuori isn't using some of it to invest in the business. Kudla plans to invest in infrastructure and technology, as well as continue building out an executive team and hiring across the company. Going into the pandemic, the company had about 100 employees, but it now has 450 and Kudla expects that number to hit 1,000 in the next three years.
However, as the Encinitas, California, brand rightly touted in its press release, Vuori has been profitable since 2017, just two years after its launch. Kudla built the business thanks to $2.5 million he raised from family and friends, far from the tens of millions some brands raise to grow their companies.
"A lot of people see $400 million raised, they assume all of that went to the company's balance sheet. For us, that was not the case," Kudla said.
Vuori's profitability sets it apart from many other DTC brands, including several that have recently filed to go public in a red-hot market. Asked if it, too, plans an IPO, Kudla said the company hasn't made that decision yet.
"We're definitely not naive to what's happening in the public markets," Kudla said. "We're keeping a close eye on it. And it is one path that we may consider in the future."
'We want to do it the right way'
A CPA prior to founding Vuori, Kudla said he's been conservative in growing the brand from the start, and has always emphasized profitability. The company grew out of a garage, and never raised the kind of capital that others in the industry have. Vuori's small initial funding meant that "we had to make that money last," Kudla said, so the brand's focus turned to building its relationships with supply chain partners and factories rather than attempting to scale too quickly.
"I had never built an apparel brand before, I didn't have a successful track record in consumer products. And so it wasn't maybe as natural for me to go out to market and raise capital," Kudla said. "And so when a lot of our peers launching in this DTC era were out raising $20, $30, $50, sometimes $100 million, they could afford to be a little more aggressive from a customer acquisition standpoint."
Vuori went a different direction than most. The company focused on organic customer acquisition, which to Kudla required creating high quality, differentiated products, and building strong relationships with suppliers and customers. That strategy is part of why Kudla thinks Vuori has been able to achieve profitability, alongside an early start with wholesale partners. Vuori currently sells through Nordstrom and REI, among others.
"While we didn't want wholesale to be a majority of our business, and we didn't want to sell to everybody, we believed that there was a place for strategic wholesale partnerships from the very beginning," Kudla said. "And that also helped us with our working capital model."
"Vuori wants to be a relevant household name 20 years from now. We have no interest in growing really, really fast just to hit some number and then falling out of favor with consumers or having a major quality issue."
Founder and CEO of Vuori
Although profitability is key to making any retail business function, it hasn't been a common sight in the retail startups of the day. Even some of retail's most well-established and popular DTC brands, like Casper, Allbirds and Warby Parker, have revealed consistent losses as they've scaled. It's a problem that many experts attribute, at least in part, to the reliance on venture capital funding, which has cultivated in some brands a grow-at-all-costs mentality.
"In our space, I think profitability should be important, and so we just didn't get too far ahead of ourselves from an investment standpoint when it comes to people and infrastructure," Kudla said. "It might have made growing pains maybe a little bit harder, I can't say for certain because I'm not at some of these other brands. But I think you can choose to implement a lot of infrastructure at the very beginning, which can be costly, or you can invest as you grow, which can be a little more challenging to do in the midst of dynamic growth."
Vuori's been growing at a 250% compound annual growth rate since its inception, according to Kudla, which puts stress on a lot of areas of the business. To combat that, the brand has remained focused on controlling its rising popularity rather than scaling too fast for it to handle.
"We are very conscientious to not grow too fast, and there's already so much demand for our brand in the marketplace that we want to make sure we're continuing to look at our growth and look at the business through the lens of like a 10, 15, 20-year operating model," Kudla said. "Vuori wants to be a relevant household name 20 years from now. We have no interest in growing really, really fast just to hit some number and then falling out of favor with consumers or having a major quality issue."
As an example, Kudla pointed to the number of stores Vuori plans to open next year. With 100 future U.S. stores on the docket, 2022 will see just 15. He compares that number to competitors like Lululemon opening 35 to 50 stores in a given year, which is not "necessary" for Vuori to reach its goals.
"We want to do it the right way," Kudla said. "We want to identify the right real estate. We're only going to do business with the right wholesale partners that make sense for the brand. And we're going to continue to nurture that direct relationship with the customer."
'Our goal is not to sell to everybody'
True to how it started, profitability will still be a priority as Vuori grows. But expansion across the business is also coming to capitalize on the popularity Vuori is seeing. During the pandemic, Vuori expected to double its fitness sales, but the category ended up tripling, according to Kudla. And the company is on pace for 140% growth in 2021.
Vuori plans to take advantage of that momentum in a number of ways, including expanding its assortment, accelerating its growth overseas and adding more stores in the U.S. At launch, Vuori was purely a fitness brand, emphasizing clothing for workouts, but now it also creates products for outdoor, travel and commute, and swim. All of those assortments will be growing, according to Kudla, and the company plans to develop more products, including accessories, socks and underwear.
"We see this casualization of the country really taking form. I think that trend was happening before COVID and the lockdowns, but I think the pandemic has really accelerated that trend," Kudla said. "We're seeing those products that are built from really comfortable, breathable fabrics but in really traditional, presentable silhouettes — buttoned down polos, men's trousers, products that people can jump on a zoom call but still feel like they're living in their activewear — that category is growing very strong. And so we're going to continue to mature and grow that as well."
With a broader assortment on the docket, store space is also increasingly important. As Vuori looks to execute on its U.S. store footprint expansion over the next few years, the brand is looking to data from its wholesale partners to inform where to open locations, in addition to its own e-commerce data. Some stores are aimed at serving an existing customer base that lives in the target area, while others will be strategically placed in "active, health-conscious" communities that haven't adopted Vuori yet.
Locations scheduled to open so far include two stores in New York and one on Newbury Street in Boston, and Kudla said the company is actively looking at Georgetown in Washington, D.C. More broadly, the effort is to expand Vuori outside of its home base of California, which holds the majority of its stores. Vuori opened its first store outside of California in Boulder, Colorado, in May this year.
A similar strategy is informing international expansion. So far, Kudla said Vuori executives "love" Europe, Australia, New Zealand and Asia. Having raised its investment through SoftBank, Japan is a particularly exciting opportunity, as Vuori now has access to expertise on navigating that market. And China is also in the playbook, with plans to build out an e-commerce presence on Tmall next year. Both countries will get stores in 2023.
Wholesale, while important, likely won't expand much beyond its current partners.
"Our goal is not to sell to everybody: We want to sell to the best retailers who are committed to great visual storytelling, really committed to sharing the story in an authentic way," Kudla said. "And so we're not looking at our wholesale business as a means to drive significant revenue growth, but we are committed to building really great relationships with the partners that we're choosing to be in business with."
It's not the big things Kudla is worried about when scaling. It's keeping the company's culture intact as it hires ever more employees, and building up a more resilient supply chain to handle growth.
"In our space, people want to complicate it oftentimes," Kudla said, "but at the end of the day, it just comes down to making really good product and treating people really well."