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lululemon athletica, Inc.

STEVEN BAYLEY
EMILY BEALE
YANA DUBINSKY
ELIZABETH PEEDIN

MGMT 6722
Dr. Karriker
About lululemon….

—  Designer, retailer of high-end yoga inspired athletic


wear with locations in Canada, US, New Zealand,
and Australia
About lululemon….

—  Designer, retailer of high-end yoga inspired athletic


wear with locations in Canada, US, New Zealand,
and Australia
—  Began when Chip Wilson opened a design/yoga
studio in 1998 in Vancouver, British Columbia
About lululemon….

—  Designer, retailer of high-end yoga inspired athletic


wear with locations in Canada, US, New Zealand,
and Australia
—  Began when Chip Wilson opened a design/yoga
studio in 1998 in Vancouver, British Columbia
—  Community hub where people learn and discuss
physical aspects of healthy living
What does the Lululemon customer look like?
What does the lululemon customer look like?

“Other than their poise and


perfect coifs, you can identify
members of this gym robot
army by their brand of clothing.
You’ve seen them at your gym,
at the Whole Foods and in line
for green juices;
What does the lululemon customer look like?

“Other than their poise and


perfect coifs, you can identify
members of this gym robot
army by their brand of clothing.
You’ve seen them at your gym,
at the Whole Foods and in line
for green juices;

they’re the
lululemon
ladies!”
Read more:
http://www.blisstree.com/2013/08/14/fitness/optical-illusion-look-like-a-
lululemon-lady-even-though-youre-poor/#ixzz2gOfyUCB7
What does the lululemon customer look like?

—  Woman
—  Fit
—  Healthy
—  Active
—  Athletic
—  Yoga
What does the lululemon customer look like?

—  Woman
—  Fit
—  Healthy
—  Active
—  Athletic
—  Yoga
—  Wealthy
What does the lululemon customer look like?

—  Woman
—  Fit
—  Healthy
—  Active
—  Athletic
—  Yoga
—  Wealthy
—  Educated
—  Sophisticated
Lucky LuLu

Lindsey Cooper
•  32
•  Marketing Executive
•  University of Richmond alum
•  Married, No Kids (froze eggs at
29, just in case)
•  Orders groceries from Whole
Foods online and has them
delivered
•  2400 Sq. Ft. Condo in Chevy
Chase, MD with her husband
Reed, a senior analyst for The
Brookings Institution
•  Just bought a 2014 Toyota
Seqouia
•  HHI: 230K
Lululemon Manifesto
It is a lifestyle!!!
—  The pursuit of happiness
is the source of
unhappiness
—  Dance, sing, floss, and
travel
—  Practice yoga so you can
remain active in physical
sports as you age.
The Insight

Lucky LuLu’s are addicted to


Inconspicuous Consumption
Athletic Apparel Positioning
High

Lulu-
lemon
Price/Perceived Quality and Image

Prana Under
Athleta Armour
Nike

New
Balance

Reebok
Adidas
Old
Low

Navy

Niche Broad
Broad v. Niche Market
Competitive Forces

—  Competition from rival sellers – vigorous competition from multiple large
companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple
smaller ones such as Lorna Jane, Lole, and Gap Athleta
Competitive Forces

—  Competition from rival sellers – vigorous competition from multiple large
companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple
smaller ones such as Lorna Jane, Lole, and Gap Athleta

—  Competition from potential new entrants to industry – Vary: low from new
players due to time and funds, high from current apparel designers and retailers like
Gap
Competitive Forces

—  Competition from rival sellers – vigorous competition from multiple large
companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple
smaller ones such as Lorna Jane, Lole, and Gap Athleta

—  Competition from potential new entrants to industry – Vary: low from new
players due to time and funds, high from current apparel designers and retailers like
Gap

—  Competition from producers of substitute products – shorts, pants, or other


clothing not intended for athletic use
Competitive Forces

—  Competition from rival sellers – vigorous competition from multiple large
companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple
smaller ones such as Lorna Jane, Lole, and Gap Athleta

—  Competition from potential new entrants to industry – Vary: low from new
players due to time and funds, high from current apparel designers and retailers like
Gap

—  Competition from producers of substitute products – shorts, pants, or other


clothing not intended for athletic use

—  Supplier bargaining power – in introductory phase, high bargaining power due
to increased investment and desire to work with leading fabric suppliers; 90% of
apparel production in Asia but will use US/Canada production facilities as needed
Competitive Forces

—  Competition from rival sellers – vigorous competition from multiple large
companies such as Nike, Under Armour , Adidas, Reebok, in addition to multiple
smaller ones such as Lorna Jane, Lole, and Gap Athleta

—  Competition from potential new entrants to industry – Vary: low from new
players due to time and funds, high from current apparel designers and retailers like
Gap

—  Competition from producers of substitute products – shorts, pants, or other


clothing not intended for athletic use

—  Supplier bargaining power – in introductory phase, high bargaining power due
to increased investment and desire to work with leading fabric suppliers; 90% of
apparel production in Asia but will use US/Canada production facilities as needed

—  Customer bargaining power – high due to: low cost of switching, buyers ability
to delay purchases, multiple other brands from which to choose
SWOT Analysis
Strength
Trademarked fabrics
Community involvement – offered free yoga class on monthly
basis
Employee training
Innovation
Style/comfort
Multiple green initiatives
Quality – products designed to sustain 5 years of intended use
while maintaining functional
Brand identity
SWOT Analysis
Weakness
Strength
Narrow product line,
Trademarked fabrics
High retail price
Community involvement – offered free yoga class on monthly
basis Quality control/supply chain
Employee training Marketing targeted to mostly yoga instructors/studios
Innovation Loss of customer service with increased scale
Style/comfort Weak brand recognition
Multiple green initiatives
Quality – products designed to sustain 5 years of intended use
while maintaining functional
Brand identity
SWOT Analysis
Weakness
Strength
Narrow product line,
Trademarked fabrics
High retail price
Community involvement – offered free yoga class on monthly
basis Quality control/supply chain
Employee training Marketing targeted to mostly yoga instructors/studios
Innovation Loss of customer service with increased scale
Style/comfort Weak brand recognition
Multiple green initiatives
Quality – products designed to sustain 5 years of intended use
while maintaining functional
Brand identity

Opportunity
Expand product line
Serve additional market segments
Expand into additional geographic markets
Increased demand in athletic apparel
Fitness craze
SWOT Analysis
Weakness
Strength
Narrow product line,
Trademarked fabrics
High retail price
Community involvement – offered free yoga class on monthly
basis Quality control/supply chain
Employee training Marketing targeted to mostly yoga instructors/studios
Innovation Loss of customer service with increased scale
Style/comfort Weak brand recognition
Multiple green initiatives
Quality – products designed to sustain 5 years of intended use
while maintaining functional
Brand identity

Opportunity Threats
Expand product line Increased competition from current large players in the
market,
Serve additional market segments
Copy cats
Expand into additional geographic markets
Economy
Increased demand in athletic apparel
New entrants
Fitness craze
Risk of banking on niche markets
SWOT Analysis
Weakness
Strength
Narrow product line,
Trademarked fabrics
High retail price
Community involvement – offered free yoga class on monthly
basis Quality control/supply chain
Employee training Marketing targeted to mostly yoga instructors/studios
Innovation Loss of customer service with increased scale
Style/comfort Weak brand recognition
Multiple green initiatives
Quality – products designed to sustain 5 years of intended use
while maintaining functional
Brand identity

Opportunity Threats
Expand product line Increased competition from current large players in the
market,
Serve additional market segments
Copy cats
Expand into additional geographic markets
Economy
Increased demand in athletic apparel
New entrants
Fitness craze
Risk of banking on niche markets
Value Chain

Operations:
Distribution: Profit
Supply Chain streamlined Sales and Margin:
design and facilities in
Management: Vancouver-BC, marketing:
development Service:
received real Sumner, community
processes. “educators”, Net PM
time input from Washington, based, yoga
Production is “guests”, 17.1%
customers, short and instructors
the only lululemon about 15%
time to receive Melbourne, ambassadors,
and approve activity that is manifesto above
Australia; community
samples outsourced to industry
online retail coordinators
low cost average
store
countries
Value Chain

Operations:
streamlined Distribution: Profit
Supply Chain facilities in Sales and Margin:
design and
Management: Vancouver-BC, marketing:
development Service:
received real Sumner, community
processes. “educators”, Net PM
time input from Washington, based, yoga
Production is “guests”, 17.1%
customers, short and instructors
time to receive the only lululemon about 15%
Melbourne, ambassadors,
and approve activity that is manifesto above
Australia; community
samples outsourced to industry
online retail coordinators
low cost average
store
countries

Product R&D, Technology, and System Development


• Innovation Driven, based in Canada and US – short time to market
• Technology of new fabrics - so far introduced 3 new materials: luon, luxtreme, and silverescent
Value Chain

Operations:
streamlined Distribution: Profit
Supply Chain facilities in Sales and Margin:
design and
Management: Vancouver-BC, marketing:
development Service:
received real Sumner, community
processes. “educators”, Net PM
time input from Washington, based, yoga
Production is “guests”, 17.1%
customers, short and instructors
time to receive the only lululemon about 15%
Melbourne, ambassadors,
and approve activity that is manifesto above
Australia; community
samples outsourced to industry
online retail coordinators
low cost average
store
countries

Product R&D, Technology, and System Development


•  Innovation Driven, based in Canada and US – short time to market
•  Technology of new fabrics - so far introduced 3 new materials

Human Resources Management


•  Customer oriented, coaches, through Yoga instructors,
•  Community feeling with sales associates that share the passion
Value Chain

Operations:
streamlined Distribution: Profit
Supply Chain facilities in Sales and Margin:
design and
Management: Vancouver-BC, marketing:
development Service:
received real Sumner, community
processes. “educators”, Net PM
time input from Washington, based, yoga
Production is “guests”, 17.1%
customers, short and instructors
time to receive the only lululemon about 15%
Melbourne, ambassadors,
and approve activity that is manifesto above
Australia; community
samples outsourced to industry
online retail coordinators
low cost average
store
countries

Product R&D, Technology, and System Development


•  Innovation Driven, based in Canada and US – short time to market
•  Technology of new fabrics - so far introduced 3 new materials

Human Resources Management


•  Customer oriented, coaches, through Yoga instructors,
•  Community feeling with sales associates that share the passion

General Administration
•  Founder – Wilson was CEO 2000-2005
•  Remained actively involved as head of innovation department untill2012
Key Success Factors

—  Community Based Marketing


Key Success Factors

—  Community Based Marketing

—  Superior Customer Interaction


Key Success Factors

—  Community Based Marketing

—  Superior Customer Interaction

—  Technological Innovation


Community Based Marketing
Strategy

—  Focused differentiation


•  Focusing on lifestyle perception
Strategy

—  Focused differentiation


•  Focusing on lifestyle perception
•  Creating superior products (features, design, performance)
Strategy

—  Focused differentiation


•  Focusing on lifestyle perception
•  Creating superior products (features, design, performance)
•  Striving for innovation and technological advances
Strategy

—  Focused differentiation


•  Focusing on lifestyle perception
•  Creating superior products (features, design, performance)
•  Striving for innovation and technological advances
•  Emphasizing marketing and brand-building activities
Strategy

—  Focused differentiation


•  Focusing on lifestyle perception
•  Creating superior products (features, design, performance)
•  Striving for innovation and technological advances
•  Emphasizing marketing and brand-building activities
•  Pursuing continuous quality improvement
Growth

— GROWTH
Growth

— GROWTH
—  Net profit increase of 24x over past five years
Growth

— GROWTH
—  Net profit increase of 24x over past five years

—  EPS increase of 21x over past five years


Growth

— GROWTH
—  Net profit increase of 24x over past five years

—  EPS increase of 21x over past five years

—  Expanded # of stores by 133 in five years


Improved Operations

—  Operating profit increase of 17X in five years

—  Improved inventory turnover by 1.4 in five years

—  Cash provided by operations increased by $178.2M


over past five years

—  Average sales per square foot increased by $593M in


five years
Valuation Measures

—  Net profit increase of 24x over past five years

—  EPS increase of 21x over past five years

—  Return on equity increased by 10% in five years

—  Gross profit margin increase of 5.5% over past five


years
Financial Highlights (Most Recent Quarter: Aug 4, 2013)

—  Profit Margin: 18.12% (2012: 18.49%)

—  Operating Margin: 26.50% (2012: 28.67%)

—  Return on Equity: 31.72% (2012: 30.52%)

—  Gross Profit: 762.83M (2012: 569.3M)

—  Gross profit margin: 5.11 % (2012: 5.69%)

—  Diluted EPS: 1.85 (2012: 1.27)

—  Operating Cash Flow: 287.52M (2012: 203.6M)


Central Issues/Problems

—  Quality control/supply chain – recent issues with recalls


Central Issues/Problems

—  Quality control/supply chain – recent issues with recalls

—  Narrow focus – primary target: sophisticated and


educated women who understand importance of active,
healthy lifestyle (although expanding into men’s and
youth female athletic wear)
Central Issues/Problems

—  Quality control/supply chain – recent issues with recalls

—  Narrow focus – primary target: sophisticated and


educated women who understand importance of active,
healthy lifestyle (although expanding into men’s and
youth female athletic wear)

—  Missing out on major markets (Europe/Asia/South


America)
Central Issues/Problems

—  Quality control/supply chain – recent issues with recalls

—  Narrow focus – primary target: sophisticated and


educated women who understand importance of active,
healthy lifestyle (although expanding into men’s and
youth female athletic wear)

—  Missing out on major markets (Europe/Asia/South


America)

—  Lack of brand awareness/mass marketing


References

—  Gamble, J., Peteraf, M., Strickland, A., Thompson, A.


Crafting and executing strategy (2014). McGraw-Hill
Education.

—  http://www.lululemon.com/education/

—  http://finance.yahoo.com/q/ks?s=LULU+Key+Statistics