Lululemon Research Paper

Lululemon Athletica Inc. (Fitness Apparel)
Lululemon Athletica Inc., also referred to as Lululemon, is an athletic apparel retailer from Canada. You can find them on Nasdaq with the ticker code LULU, as they are a publicly traded company. Lululemon was founded by Chip Wilson in Vancouver, in 1998. It didn’t take long time for Lululemon to become a wide-spread sensation throughout the United States. As of October 2015, Lululemon had over 354 stores worldwide. With growing popularity of the brand, it is not a surprise how successful the company itself has become. According to many, their products still maintain to be unique within the massive athletic-wear industry. Today, Lululemon produces outfits and gear for many different types of sports

and activities and by doing so, it goes beyond being the maker of a certain type of clothing becomes the supplier of a certain lifestyle.
Their collection, however, has not always been diverse.

In the beginning they focused solely on yoga apparel. When they began production, they functioned as a design studio during the day, and then after normal store hours, they re-opened at night as a yoga studio at. I believe this is how they were able to make their products stand out in the first place: because of their direct connection with the practice of yoga. They were able to create and execute practical and reasonable outfits that were specialized for the activity, knowing first-hand what type of material and styles are comfortable for the moves. Their yoga apparel was comfortable, flexible and it integrated a flattering fit. Later, they applied this hands-on design and production perspective to other athletic fields when expanding their collection. By widening their products’ range, they have reached a greater clientele, and yet yoga is still their main game. Unlike Nike, Adidas, and Athleta, Lululemon does not sell shoes, but instead they focus only on what has made their brand originally successful – yoga-wear. Lululemon’s prices are on the higher end of the scale. While you can find yoga pants for as low as $25.00 at Gap, a pair at Lululemon can range anywhere from $75.00 to $130.00. (The Week Staff). Nevertheless, the price range and the quality of products do match with the expectations of their targeted consumer groups. And, as yoga’s popularity and hype in still on the rise, the brand remains a

success.
According to The Wall Street Journal, Lululemon’s “secret sauce” is the result of two main factors: eavesdropping and scarcity. Employees are spending a lot of time in stores, listening to their clients’ needs and feedback, either directly or indirectly. The employees have their registers positioned closer to the locker rooms in the back of the store to overhear their clients and what they think about their clothing - a strategy which Lululemon has implemented in all of their locations. They then report the information they have gather to their corporate headquarters. In addition to this indirect approach of collecting consumer data, they also place chalk-boards in their locations for anyone to write down their thoughts and comments directly. Another one of their strategies related to the live contact principle is making their products inventory only partially available online in order to have their clients come into the store and try on more things in-person. The second success factor, “scarcity model” is based on the premise that their outlet stores may keep only a limited supply of stock (The Week Staff). They believe that by having qualitatively as well as quantitatively rare products, actually lead their clients to be more eager to come in sooner than later, try on, and of course, purchase. Lululemon followers know that pieces sell out fast and this creates a sense of urgency for them to take action. These two main factors have resulted in their early success as they helped the company form an original approach to the fulfillment of the supply/demand cycle, in comparison to most retailers in the sub-industries they are competing with.
On their website, Lululemon provides quarterly financial reports dating back to the year they opened.

Most recently, the fourth quarter of 2017 earnings show a 2.6 billion net revenue. Their success was mostly due to the incomes through sales of accessories, outerwear as well as women’s pants. Their net revenue had increased by 18% and an 11% computer sales increase. On the fourth quarter report, you can see that there was also a $522.4 million gross profit which is a 22% increase. Glenn Murphy, Executive Chairman of the Board, Lululemon stated that they are “pleased” with these results for the forth quarter of fiscal year 2017

(Lululemon.com).
Also, located on their website, Lululemon has a section designated for “Corporate Governance”, there is a PDF labeled March 2017 once you click on the PDF, you will find the Audit Committee Charter. The document sheds light on the purpose of the Board of Directors also referred to as the “Audit Committee” and their oversight rules and responsibilities. It is a 5-page document that goes into depth about their accounting practices and their protocol. Including their membership within the Nasdaq, Securities Exchange Act and Securities and Exchange Commission (“SEC”) (Lululemon.com).
Lululemon has obtained considerably positive success and earnings through sales while the string of recent lawsuits did not help the company’s overall course. One lawsuit involved an employee who had been raped by a supervisor (Mangan). Another one resulted from the claim that Lululemon’s expensive yoga pants were see-through, which in fact caused a “17% stock price plunge in June 10, 2013.” Although it did not take long for the stocks to rise again 24% once the black yoga pants were recalled (Smith).
In 2007, Lululemon was eager to get a jumpstart, selling shares for $2.00 each (The Week Staff). Only a couple years later, they were selling shares for $76.00 and already estimating a 10-billion total worth according to The Week. In 2012, the company reported a $74 million quarterly profit from their sales. Today, Lululemon has over 15,909,091 shares and total expenses of $6,000,000.00 according to Nasdaq’s official website. The stock is on the rise and the current price is $95.00 a share. As we can see there has been a steady increase through the years since Lululemon first opened its doors, first to the consumers, and then to the public shareholders. Even though we see an undeniable success story, a business and as a brand, I would not consider investing in Lululemon due to the recent lawsuits that plunged their stock within hours. Lawsuits are not uncommon and Lululemon was able to bounce back quick from their own lawsuit, but it just shows how fragile the company is and how unpredictable the stocks are. Clearly, there is revenue in buying LULU stocks, but it is not enough to be considered a solid, income-flowing investment venue.

Works Cited

“Q4 2017 Earnings.” Quarterly Infographic_Q42017, Lululemon, files.shareholder.com/downloads/LULU/6217342847x0x975306/EB8032DD-DC41-4A42-B3CD-A097C0521FF4/Quarterly_Infographic_Q42017.pdf.

“Audit Committee Charter.” Corporate Governance, Lululemon, Mar. 2017, files.shareholder.com/downloads/LULU/6217342847x0x818593/187C72DC-A128-4E69-B2F0-60A0C9BE2ACE/LULU_WebDoc_2417.pdf.

“History.” Info.lululemon.com, info.lululemon.com/about/our-story/history.

Smith, Aaron. “Lululemon Sued for See-through Yoga Pants.” CNNMoney, Cable News Network, 3 July 2013, money.cnn.com/2013/07/03/news/companies/lululemon-yoga-lawsuit/index.html.

“Lululemon Athletica Inc. Common Stock (LULU).” NASDAQ.com, www.nasdaq.com/symbol/lulu.

Mangan, Dan. “Lululemon Worker Raped by Boss after Company Created 'Perfect Environment' for Sex Predator, Suit Says.” CNBC, CNBC, 20 Dec. 2017, www.cnbc.com/2017/12/20/suit-claims-lululemon-supervisor-raped-worker.html.

Mattioli, Dana. “Lululemon's Secret Sauce.” The Wall Street Journal, Dow Jones & Company, 22 Mar. 2012, www.wsj.com/articles/SB10001424052702303812904577295882632723066?mod=ITP_marketplace_0.

The Week Staff. “How Did Lululemon Become a $10 Billion Yoga Empire?” The Week: All You Need to Know about Everything That Matters, 26 Mar. 2012, theweek.com/articles/476987/how-did-lululemon-become-10-billion-yoga-empire.