Lululemon Essay

Lululemon Athletica operates in one of the largest industries in the global market today. Lululemon is considered to be a part of the textile-apparel industry. Lululemon is credited with starting the yoga apparel trend and dominated in that area for years. Since the apparel industry is highly competitive, many of its competitors began to produce similar products when the yoga craze was at its peak. Nike started its very own yoga line which showed promise and remains one of Lululemon’s greatest competitors. Other companies, like Under Armor, have started marketing campaigns that targeted Lululemon’s audience. Also new companies like, Lucy Activewear, have entered the apparel industry increasing Lululemon’s competition. The trillion dollar textile

industry has had an increasing trend and is expected to continually increase. Though there is tough competition in the textile-apparel industry, it is an industry with a promising future economic outlook. Over the past several years the fad of healthy living has increased tremendously.

This has caused an increased demand in athletic apparel where Lululemon operates.

After analyzing Lululemon’s annual report there are some major risk factors that stand out. A major risk factor would be their heavy reliance on a small number of suppliers to produce their products. According to their 10K annual report, Lululemon acquires forty percent of their raw material from a single manufacturer. This is considered a serious risk factor because if that manufacturer is unable to provide them with materials needed for production, they will not be able to meet ordinary supply quota. Also, if demand for their product increases, there is a significant chance that they will be unable to keep up with what the consumers are demanding. Another significant risk factor is if their customers are in any way disappointed with the quality of their product, their business could be affected significantly. Lululemon is well known for their high quality products, so if at any point customers become dissatisfied with their products it can take a huge toll on their business. They briefly mentioned that a situation has

happened before in which their customers were dissatisfied with their products. According to a Business Insider article, in 2013, Lululemon recalled a style of their yoga pants when customers were disappointed with the product. According to the article, that recall cost the company up to sixty seven million dollars in revenue. The dissatisfaction from customers not only can affect their revenue, but it could also have an adverse effect on their brand name. Much of their success in the apparel industry has to do with the fact that their brand is highly respected. If their brand were to be tainted by negative publicity, like a recall on their products, it could have a significant effect on their financial statements. Another risk factor that was discussed in their annual report was how an economic down turn could greatly affect their general course of business. Since their products would not be considered necessities, during rough economic periods demand for their product could potentially drop. Lululemon are reliant upon a stimulated economy in which people have extra means for purchasing high quality apparel.
Lululemon’s future plans include expansion of their corporate owned stores and improving their direct to consumer methods.

They are emphasizing growth both domestically and internationally. Since there is such fierce competition in the apparel industry, Lululemon realizes they cannot continue to expand solely in the US; In January 2015, Lululemon entered into a licensing agreement with a partner in the Middle East. This agreement will allow the company to expand their brand in the United Arab Emirates, Kuwait, Qatar. Bahrain, and Oman. They also plan on expanding their stores in Australia and Japan. Since there is such fierce competition in the apparel industry, not only will expanding their stores increase profitability, but it will also increase the recognition of their brand globally. They also plan to work closely with their suppliers “to incorporate innovative fabrics and bring particular specifications of their products”. The innovation of new products and designs will help the company stand out from its major competitors. They also plan on expanding their Men’s line of clothing in order to keep up with its competitors like Nike and

Adidas.
Lululemon was able to increase its revenue by thirteen percent in 2014 and plans to continue their growth in the next coming years. For the next fiscal year they expect their revenue to increase by at least 9.4 percent. They also estimate that their earnings per share is expected to increase by at least eleven percent. Overall Lululemon predicts that their financial standing will only improve over the next fiscal year.