Lululemon

A Company Analysis

May 1, 2020

Executive Summary
This paper presents an analysis of Lululemon, one of the most iconic fitness apparel
brands in the world. This paper includes a company overview, response to globalization, company
strategy, SWOT analysis, company organization, financial performance, competitive advantage,
and current events using secondary sources including the company annual report of the last three
years.
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Key facts from the analysis include:

- Lululemon's headquarters in Vancouver, Canada originally started manufacturing and
distributing women’s yoga apparel, and has expanded to men’s, accessories, and self-care
categories. The company vision is to be the experiential brand that ignites a community of
people through sweat, grow, and connect, called "living the sweatlife."
- The company decided to go global because of the strong demand for athletic wear.
Lululemon goes global by tailoring to its audience, establishing a strong community, and
sourcing internationally.
- The Power of Three strategic plan to drive product innovation, create integrated Omni
guest experiences, and to expand deeper in key markets around the world with a focus on
expanding across Asia-Pacific regions, Europe, the Middle East, and Africa. The company
expects to quadruple revenue in the international business.
- The SWOT analysis revealed strengths for Lululemon including a multi-channel
distribution approach, focus on product design and development, and strong community.
Weaknesses included high price points, no property rights, difficulty expanding into new
markets, weak brand recognition and products being imitated by competitors.
Management identified plans to double sales, expand men’s business and growth overseas,
loyalty program, brand ambassador, omni guest experience, open a store with yoga studio
and mediation spaces in the future as future opportunities. Threats to the business
identified include competition retailers, changing customer preferences, and the economy.
- Lululemon has more stores than their competitors and a specific target market which is
helpful to create a strong sense of community.
Current Events
Title: Lululemon Says Coronavirus Curbed Sales Growth in March; Activewear company says
business was strong before U.S. and European stores went dark
Date: March 26, 2020
Author: Suzanne Kapner
A threat that is currently affecting Lululemon is the COVID-19 concern. The importance
of the article to the SWOT analysis is that due to COVID-19, it has strongly affected many major
retailers. Prior to the COVID-19 pandemic, Lululemon reported that the company had a strong
growth in the year end quarter, but had then slowed down in the second week of March as the
Coronavirus forced store closure in the United States and Europe and only had ecommerce
available for consumers.
TABLE OF CONTENTS

EXECUTIVE SUMMARY………………………………………………………………………..1

TABLE OF CONTENTS………………………………………………………………………….2

INTRODUCTION………………………………………………………………………………...3
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Company Overview……………………………………………………………………….3

Response to Globalization………………………………………………………………...3

Company Strategy………………………………………………………………………...4

Company Organization……………………………………………………………………5

Financial Performance…………………………………………………………………….5

SWOT Analysis…………………………………………………………………………...6

Competitive Strategy/Advantage….………………………………………………………9

Current Event……………………………………………………………………………...9

CONCLUSION…………………………………………………………………………………...10

REFERENCES…………………………………………………………………………………....11

Introduction

This paper provides an overview of Lululemon, a Canadian athletic retailer founded in

1998 with 440 stores in 14 countries with 285 stores in the U.S. Lululemon and the Lululemon e-

commerce website. Secondary research was used to examine the company’s major competitors,

strategies, leadership, response to globalization, and financial performances during the past three

years. A SWOT analysis was conducted to provide insight into the company’s strengths and

weaknesses as it relates to the company’s competitive strategy and competitive advantage.

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Company Overview

Lululemon’s headquarters is in Vancouver, Canada. The company distributes products in

North America, Canada, Asia, Europe, Middle East, and Africa and manufactures products in

North America, Asia, and South America. Lululemon currently employs 15,700 full-time

employees and reported revenue of $3.749 million as of 2019 (Mergent).

The company vision is to be the experiential brand that ignites a community of people

through sweat, growth, and connection, which is known as "living the sweatlife." The company

originally started with yoga apparel, and has expanded into men's apparel, accessories, and self-

care categories. Lululemon focuses on creating athletic apparel for men and women from

technical and innovative textile designs.

Response to Globalization

Lululemon has always planned to expand the “sweat life” across cultures and geographies

as a form of connecting the community and expanding the company’s revenue. The company

decided to globalalize because of the strong global demand for athletic wear. Lululemon goes

global by tailoring to its audience, establishing a strong community, and sourcing internationally.

With the help of a strong demand for e-commerce goods, global awareness, and a dedicated

community, Lululemon has been able to grow internationally.

Lululemon has store locations in over twelve different countries totaling to 440 stores and

continues efforts to expand where there is a strong demand and opportunity for growth. However,

the company’s globalization methods do not stop here, Lululemon works on establishing a strong

community tied into the brand. By developing a strong community, the company can collaborate

and establish relationships with fitness leaders, athletic teams, and fitness establishments. Since
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Lululemon sources internationally the company can incorporate new technology adaptations,

increase production rates, and gain greater accessibility to reach customers globally.

Company Strategy

Lululemon plans on the next phase of growth by implementing a five-year plan, including

innovative products, Omni guest experience, and expansion of markets. The company plans to

fuel growth through its “Power of Three” strategic plan which aims to double sales in the men’s

and digital categories, quadruple sales in the international business, and continue to generate

double-digit growth in North America (Lululemon). The Power of Three strategy focuses on

driving product innovation, improving brand awareness in the men’s category, and tapping into

consumers’ growing preference for athleisure. To do this the company aims to launch new

products related to activities such as yoga, running, and training, and creating an integrated Omni

guest experience by doubling digital revenue to connect with its consumers through an innovative

membership program.

Furthermore, to attract and expand into key markets around the world, success in

international markets demonstrated that the “sweatlife” translates across cultures which presents

potential growth for the brand. The brand will be projecting its focus on expanding its market

across Asia-Pacific regions, Europe, the Middle East, and Africa.

Company Organization

Lululemon is organized by geographic based divisions led by senior management teams.

The current CEO of Lululemon is Calvin McDonald who serves as a member of the company’s

board of directors. Executive Vice President, Celeste Burgoyne, oversees all Canadian and U.S

retailers (Lululemon). Further, the company conducts its business through company-operated

stores and direct to consumers.

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Financial Performance

Lululemon’s total sales increased from 2017 to 2018 by $639,138 (19.44%), and from

2018 to 2019 by $690,977 (21.01%). The net profit increased from 2017 to 2018 by $417,497

(29.85%) and from 2018 to 2019 by $407,099 (22.41%).

Table 1: Lululemon Athletica Inc. Sales and Profit 2017-2019

Numbers in thousands (2019, Lululemon)

2019 2018 2017

Total Sales $3,979,296 $3,288,319 $2,649,181

% Change 21.02% 19.44% N/A

Net Profit $2,223,386 $1,816,287 $1,398,790

% Change 22.41% 29.85% N/A

Lululemon 2019 Annual Report

SWOT Analysis

Strengths: Strength factors for Lululemon include trademarks, sourcing technically advanced

fabrics multi-channel approach, focused on product design and development, and strong

community.

● Trademarks: Lululemon has a trademark protection for certain types of fabrics such as

Luxtreme, Luon, Silverscent and Luxchange.

● Sources advanced fabrics: The design and development team source technically

advanced fabrics with new feel and fit (Lululemon).

● Multi-channel: Lululemon uses multi-channel to market and sell their athletic apparel

(Lululemon), Also, with the multi-channel approach, Lululemon can cater to a wider

consumer base to enhance presence (Lululemon).

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● Good product and design development: The company strongly focuses on product

design and development with a team of researchers, designers and engineers based in

Canada to create the latest technical innovation (Lululemon).

● Strong community: Lululemon works on establishing a strong community tied with the

brand. By developing a strong community the company is able to collaborate and establish

a relationship with athletic teams, fitness leaders and other fitness users.

Weaknesses: Weaknesses factors for Lululemon include high price points, no property rights,

difficulty expanding into new markets, weak brand recognition and products being imitated by

competitors.

● High price points: Lululemon pricing is higher than competitor pricing for similar

products.

● No property rights: Lululemon does not own the property rights for their technology and

fabrics used in the products (Lululemon). The products that are used to produce

Lululemon products are not owned by the company but are owned by Lululemon’s

suppliers (Lululemon).

● Limited experience: The company has limited experience with the regulatory

environment and market values internationally (Lululemon).

● Weak awareness on menswear: Lululemon has a weak awareness with men’s clothing

because Lululemon strongly targets women (Lululemon).

● Weak brand recognition: Lululemon may have difficulty expanding into new

international markets because of a weak brand recognition which could lead to a slow

acceptance of athletic apparel by consumers in the new international market (Lululemon).

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Opportunities: Management identified plans to have innovative category products, double sales,

expand men’s business and growth overseas, loyalty program, brand ambassador, omni guest

experience, open a store with yoga studio and mediation spaces.

● Innovative Product: Lululemon plans to expand both core and new product categories

for women and men. The area of focus includes expanding product lines that support

yoga, running and training (Lululemon).

● Double sales: Lululemon plans to double sales of its men’s and online businesses and

quadruple international revenues by 2023 (Lululemon).

● Growth in the market: Expand its men’s business and growth overseas in markets like

China to help shape a stronger online platform and build a community of loyal consumers

(Thomas).

● New loyalty program: Lululemon also began testing a new loyalty program where

members pay an annual fee for perks such as workout classes and fast shipping

(Lululemon).

● Bring in more brand awareness: Lululemon has low brand awareness so the company

signed a deal with Eagles quarterback Nick Foles to become the first brand ambassador to

help raise awareness among men consumers (Thomas).

● Experiments: Lululemon is planning to invest more “in creating dynamic experiential

moments” for customers (Thomas). This includes Lululemon to open a 25,000-square-foot

store in Lincoln Park in Chicago in July 2020, which will have a yoga studio, mediation

spaces with juice and food.

● Omni guest experience: Lululemon has room to grow as the company creates an

integrated guest experience across all channels. Lululemon is ideally positioned to inspire
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and celebrate guest living the “sweatlife” across many experiences such as events,

innovative membership program and dynamic store formats (Lululemon).

Threats to the business identified include competition retailers, changing customer preferences,

the economy and a global pandemic.

● Competition: The market for technical athletic apparel is very competitive. The main

competitors for Lululemon are Fabletics and Athleta who also sell similar products as

Lululemon.

● Easily imitated: Lululemon’s products such as fabrics are easily imitated by its

competitor (Lululemon).

● Changing customer preference: The company may be affected by seasonal trends

common to the retail apparel industry and athletic industry.

● Economy: An economic downturn and economic uncertainty in the market may affect

consumer spending and supply chain for Lululemon’s products.

Competitive Advantages

Benefit: Lululemon has more stores than its competitors Fabletics and Athleta, this means the

company's products are highly accessible. This allows Lululemon to create a strong sense of

community because they are accessible in different geographic communities. It not only builds up

a strong family sense for people who own the garments but allows a strong word of mouth

advertisement.

Competitive Strategy: A higher price point is set because the Lululemon community values the

quality of the products. Currently the demographic is specifically targeted at women ages 18-35

so the opening of the men’s sector brings in a whole new target market to advertise to.
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Competition: The athletic apparel market is very saturated and has strong competitors like Nike

and Adidas, but Lululemon has advantages such as the quality of products, specific target market,

and strong sense of community.

Current Event

Title: Lululemon Says Coronavirus Curbed Sales Growth in March; Activewear company says

business was strong before U.S. and European stores went dark

Date: March 26, 2020

Author: Suzanne Kapner from Wall Street Journal

A threat that is currently affecting Lululemon is the COVID-19 concern. The importance

of the article to the SWOT analysis is that due to COVID-19, it has strongly affected many major

retailers. Prior to the COVID-19 pandemic, Lululemon reported that the company had a strong

growth in the year end quarter, but because of the result of COVID-19 the sales slowed down in

the second week of March as the Coronavirus forced store closure in the United States and Europe

and only had ecommerce available for consumers. Lululemon Chief Executive Calvin McDonald

added that the e-commerce continues to post strong growth but it is not making up for the lost

sales that resulted in store closure (Kapner).

Conclusion

Lululemon is an athletic retailer and distributor based in Canada, that focuses on providing

its community innovative athletic apparel. The company has seen continuous growth of 40% from

2017-2019 and has expanded globally into countries like Asia, USA, and Australia. By

establishing various locations, creating a strong community, and sourcing internationally the

company has been able to increase its revenue and reach cultures around the world. Lululemon
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expects to continue growing by expanding into its men’s apparel sector, developing athletic

accessories, and incorporating omni guest experiences.

References

Ho Solarina. (2013) Lululemon’s next challenge: overseas growth. Retrieved from

https://www.reuters.com/article/us-lululemon-outlook-analysis-
idUSBRE99712S20131008

Kapner, S. (2020). Lululemon says coronavirus curbed sales growth in march; activewear
company says business was strong before U.S. and european stores went dark. Wall
Street Journal

Lululemon. (2020) Lululemon: Our History. Retrieved from

https://shop.lululemon.com

Lululemon. (2020) Lululemon: Our History. Retrieved from

http://investor.lululemon.com/corporate-governance/management

Lululemon. (2018). Annual Report: Business. Retrieved from

http://investor.lululemon.com/static-files/2ae3c99b-e92f-4bd6-aa73-e46f6bce7166
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Mergent Online. (2019) Lululemon Athletic Inc. Retrieved from

www.mergentonline.com

Thomas, L. (2019). Lululemon targets revenue growth in low teens over next 5 years, helped by
growing men's and online sales.

“2018 Annual Report”. Lululemon., 2018, Retrieved from

http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_LULU_2018.pdf