Lululemon Strategy Report

Lululemon Strategy Report Page 1
LULULEMON STRATEGY REPORT
Prepared by:Aziz Ghani
Aziz Ghani : azizghani0@gmail.com 1416-856-6737
Business Strategy,

Contents
Introduction………………………………………………………………………………………3
Current State of Affairs………………………………………………………………………..…3
Mission……………………………………………………………………………………………3
Vision…………………………………………………………………………………………..…4
Objective……………………………………………………………………………………….…4
Current Strategy………………………………………………………………………………..…4
Corporate Governance……………………………………………………………………………5
External Environment: PESTLE…………….……………………………………………………5
Porter’s Five Forces………………………………………………………………………………7
Customers……………………………………………………………………………………...…8
Competitors………………………………………………………………………………………9
Corporate Structure………………………………………………………………………………9
Corporate Culture……………………………………………………………………………...…9
Corporate Resources…………………………………………………………………………..…10
Marketing……………………………………………………………………………...…10
Financial resources…………………………………………………………………….…10
Research and Development………………………………………………………………10
Operations and Logistics…………………………………………………………………11
Human resources…………………………………………………………………………11
Information Technology…………………………………………………………………11
Strategic Alternatives……………………………………………………………………………11
Analysis of Strategic Alternatives………………………………………………………………12
Strategic Recommendation…………………………………………………………………...…14
Implementation……………………………………………………………………………….…16
Evaluation and Control……………………………………………………………………….…16
Financial Ratios & Analysis……………………………………………………………………..17
Internal & External Analysis…………………………………………………………………….18
Pro Forma Statement…………………………………………………………………………….19
Bibliography…………………………………………………………………………………..…21

Introduction
Lululemon was founded in 1998 and opened its first retail store in Vancouver in 2000. The
company - designer and retailerof athletic apparel has expanded to become a public trading entity
on major stock exchanges. It currently operates over 200 retail stores on two continents. The
ideology behind Lululemon’s founding was to promote healthy living by means of yoga,
running, cycling and being athletically active. Lululemon continuously broadens the product it
offers to its clients.The product range includeseverything from jackets, yoga pants, mats to
general fitness wear. Lululemon’s primary target used to be young active females but in recent
years it has widened its target market by developing more products for the physically active
male.
Current performance
Lululemon is growing its operations having increased its retail presence in USA, Canada, United
Kingdom, New Zealand, Hong Kong and Australia. As of February 2013, the company has 135
stores in the US, 51 in Canada, 24 in Australia, 2 in Hong Kong and one in UK. As of the last
annual report Lululemon employed 6,383 people, the majority of whom work in the company’s
retail locations. Lululemon experienced double digit growth in its revenue and net income. In
particular its revenue grew by 37% and its net income by 47% vs. 2011 numbers.Lululemon is
currently in search for a new CEO. As per the Board of Directors’ decision the current CEO will
perform her duties until a suitable replacement is found.
Mission
Lululemon was founded with the mission of “providing people with the components to live a
longer, healthier and more fun life”. Its mission is driven by a set of core values supporting it in
developing a high standard of product, integrity in the company, promoting work-life balance,
training its employees in goal setting and self-responsibility. Over the years it has shifted from a
traditional mission statement to a so-called mission-manifesto represented by a list of
inspirational slogans.

Vision
Lululemon’s vision is “elevating the world from mediocrity to greatness.” Lululemon refers to
mediocrity as a path that is unfulfilling and not doing anything about the imperfect life people
are living.Greatness is defined as a means of living a life of getting the best of everything and
doing all that is required to achieve it.
Objective
Lululemon’s onward objective prospects in its operation are based on a number of elements.
Lululemon anticipates maintaining its position in the industry and expects to prevail amongst
competitors. Its objectives reflect current and future goals Lululemon aspires to achieve.The
following is the list of these objectives:
 Successfully identify retail locations to open new stores and attract new
customers.
 Innovate and provide customers with new products.
 Sustain its brand image in the industry.
 Achieve a positive growth while maintaining an adequate cash flow.
 Maintain and increase sales of current stores.
 Operate every department at the company efficiently.
 Maintain dedicated and experienced staff in the organization.
Continuously
Current Strategy
Lululemon’s current strategy allowed it to become one of the major players in the athletic
apparel wear. Since the company’s founding it has had to shift between different strategies to
help achieve what it is recognized for today. Lululemon’s strategic factors augmenting it in the
industry are the following:
 Lululemon applies a different method of marketing its product compared to competitors,
the approach is known as grassroots marketing. Grassroots marketing is a method where
the company targets a small audience and hopes its message will be passed through to a
larger audience. This marketing strategy costs less and is more effective than others.
 Lululemon applies a vertical retail strategy to sell its products to customers. Lululemon
only sells its product through its own stores and authorized yoga studios. The stores are

authorized to control daily operation obstacles that occur, allowing managers to give
feedback to upper levels of management in the company. Store employees are also asked
to interact with clients on an individual basis to meet their needs. Overall this allows
Lululemon to quickly respond to needs of customers and develop new products.
 Lululemon has been growingever since its foundation and intends to increase its market
share by opening new retail locations geographically and offering new innovative
products regularly.
 Lululemon continuously broadens the product line offered to females, males and the
youth. The company intends to increase revenue and customer base by increasing the
collection of products sold.
Corporate Governance
The Board of Directors elected by stockholders makes significant decisions in the company. The
board is responsible for hiring senior management, and making sure they lead the company
towards achieving its goals. The Board of Directors must be qualified and independent in its
decision-making. A Lead Director is elected from the Board to directly work with the CEO and
senior management to set agendas and goals for the company. Currently 29% of the common
stock is owned by Mr. Wilson, who has major influence in decisions that require shareholders
vote.
External Environment: PESTLE
Political Factors
Lululemon doesnot own any of the manufacturing facilities, instead it outsources its merchandise
production to manufacturers in third-world countries with unstable political environment.
Lululemon is exposed to trade embargos and increase in tariff rates. The companydoes business
in countries that have no counterfeit laws.This allows competitors to easily replicate and sell
products under Lululemon’s brand name, which maynegatively impact Lululemon’s brand image
and bottom line. Lululemon operates in countries with different tax regulations, exposing it to
double taxation if the countries donot have respective treaties in place to avoid double taxation.

Yet governments of these countries may have incentive programs applicable for Lululemon as an
employer of local labour.
Economicfactors
Lululemon operates in different economies, some of which are declining, increasing or are in a
stagnation stage, but no one can foresee the future of a market. Lululemon purchases and sells its
merchandise in different currency affecting the cost of importing and sales, which may serve as
advantage and disadvantage for Lululemon. The company is also exposed to inflation that can
have an adverse effect if operating cost increases while selling price remains the same.
Social factors
Lululemon is part of the health and wellness industry.In today’s society awareness towards living
a healthy life is emphasized, the population is more aware of the advantages that yoga and being
athletically active can bring to one’s life. Statistics has shown that yoga is one of the growing
industries having grown 87% over the past 5 years. Americans spent $10.3 billion dollars on
yoga classes and products in 2012 compared to $5.7 billion in 2008, and forecast indicates the
trend will continue its upward trajectory. The yoga industry is going to experience a rise from the
baby-boomer generation, it is estimated that 76 million Americans fall under that age group, and
they tend to be financially able to spend towards recreational activities.
Technology factors
Lululemon is operating in an era where 2.4 billion people surf the Internet causing the spread of
globalization.This allows Lululemon to have access to different manufacturers to support it in
outsourcing efficiently. The Internet also allows customers to shop more confidently as they can
compare competing productsof different producers. Retailers can take advantage of selling
through e-commerce due to low operating cost.Statistics have shown the amount spent on online
shopping was $763 billion dollars in 2011. The Internet has enabled advertising to be done
through social media, via mobile means and search engine marketing making it one of the
cheapest and efficient ways to market a product.
Legal factors

Lululemon gets involved in legal matters with its customers, employees, competitors and
suppliers due to disagreements and damages caused while doing business. The recent lawsuit
against a competitor,Calvin Klein, Lululemon filed a suit against CalvinKlein for infringing their
yoga pants patent, and however they came to a quick undisclosed settlement. Recently also an
investor has filed a lawsuit against the company for alleging Lululemon of making misleading
statements to artificially increase their stock price and failing to disclose the defects in its yoga
pants recalled for being see-through.Lululemon gets into disagreements with employees at times,
but the resolution of such matters does not have any adverse effect in the operation of the
company.
Environment
Lululemon is currently not affecting the environment directly.This is due to outsourcing all their
products through third party manufacturers. Third party suppliers are mainly located in Southeast
Asia where pollution regulation is becoming stricter.
Porters Five Forces
Threat of new entrants
The threat of new entrants is high due to low entry barriers within the industry. Lululemon does
not own any patents allowing new competitors to easily replicate their product. Lululemon’s
wear is supplied through third party manufacturers and since the company has no long-term
contract, manufacturers can easily supply other retailers under their brand name. The profit
margin can attract investors due to it being high when compared to other industries, and the trend
in people practicing yoga is on the rise. Factors such as brand equity and retail presence can be
hard for new competitors due to Lululemon having a strong position in retail locations and a
strong brand image.
Bargaining power of buyers
Bargaining power of buyers is medium due to Lululemon’s distinctive design and material when
compared to competitors’ product. However, customers can give preference to competitor’s
product due to brand image or discount and allowance pricing. The market Lululemon is

currently operating in will always be competitive and Lululemon is not the only player
dominating the industry.
Bargaining power of suppliers
Bargaining power of suppliers is low due to Lululemon not having a long term contract with its
suppliers, even though 85% of its merchandise comes from only 10 suppliers and some fabrics
are currently supplied by one company. Still Lululemon is confident of being able to get its
merchandise from other suppliers in case of any disruption from current ones, but it may be at a
higher cost.
Threat of substitute products
The threat of substitute products is high. Although the high quality and materials used in the
Lululemon apparel is difficult to replicate there is lots of other brands that cater to active
individuals. However, the lower performance and feel of the materials used by the competition
give Lululemon an advantage since the customers are less likely to switch to products of less
quality.
Rivalry among existing competitors
The rivalry among competitors in the apparel industry is high. Lululemon’s main competitors are
Nike, Adidas and Under Armor. The competitors have access to a great amount of resources as
compared to Lululemon. The competitors have been established for a longer period, they have a
larger and broader customer range, greater financial capabilities, a stronger brand image and a
broader retail presence.
Customers
Lululemon was primarily targeting women customers, but over the year it has broadened its
customer base by designing products for the youth and male. In the latest available data, 11% of
total revenue came from selling men wear, majority of the customer base is female due to many
reasons.Research has shown 82.2% of the public that practice yoga are females in the US.
Although Lululemon is known for yoga wear, female customers have made it a trend to purchase

their clothes for casual wear on daily basis. Customer age group for Lululemon’s product is
mostly 18-44 with household income of $75,000 and above.
Competitors
The athletic apparel wear industry is highly competitive. Lululemon’s top 5 competitors are
Nike, Addidas, Under Armour, Lucy Activewear and Bebe Sport. Competition is mainly through
brand image, quality, innovation and price. Lululemon’s competitors have substantial
competitive positioning due to being more established with a broader customer base and product.
Competitors are also strong in terms of financial, R&D, marketing and retail. However,
Lululemon differentiates itself in the way it markets its product and believes it has a strong loyal
customer base due to its grass root marketing and vertical retail strategy.
Internal Environment
Corporate structure
Lululemon has a functional organizational structure, allowing decisions in the organization to be
decentralized. Lululemon intends to have its organizational structure as flat as possible.
Lululemon believes cross functional communication is crucial, allowing it to innovate and
differentiate their product. Departments such as design, retail operation, information and
technology must be able to give feedback and respond to each other’s’ request quickly.
Management strives to get information flow from design to the retail store shelves in a period of
45 days. The functional structure also allows Lululemon to function more efficiently by
forecasting accurately, operating within budget and strategic plans are selected.
Corporate culture
Lululemon’s organizational culture comes from their mission manifesto and vision statement,
Lululemon’s mission manifesto is made of 31 inspirational phrases that lead one towards a
positive and healthy living. Lululemon’s anticipation is for employees to implement its mission
in their life and work, in the optimism that it would create a definite work culture. In an
interview with the current CEO, it is reported the organization promotes employees to make their

own decision when operating stores.Employees are encouraged to take responsibility and be risk
takers to give them a sense of entrepreneurship. The corporation has a golden rule that states if
an employee makes a mistake they have to take control and fix it in the expectation of learning
from the mistake.
Corporate Resources
Marketing
Lululemon believes it doesnot require implementing a traditional method of marketing instead it
has takena different path to market their product. Lululemon employs a low cost strategy of
marketing that allows it to soar to unprecedented achievements. Its strategy is grassroots
marketing.This strategyis implemented by working closely with fitness professionals and local
gym personals to help in promoting their product. The people helping them in establishing the
brand in the community is calledambassador.The ambassador works closely with the
communities in the store area, each market is separately analyzed before the grassroots
marketing blueprint is applied. Lululemon highly relies on this method of marketing.This method
has enabled it to have a strong brand image, loyal customers and a large market share in the yoga
apparel industry.
Financial
Lululemon has been experiencing positive growth from time of establishment, it recorded $1.37
billion dollars in revenue at the end of 2012.Lululemon experienced a 57% growth in 2010,
40.6% in 2011 and 37% in 2012. Net income has grown 109% in 2010, 51% in 2011 and 47% in
2012. (Please refer to page 17 of this report for full financial analysis of the past 3 years)
R&D
Lululemon’s been innovative in the products they offer to its customers this is achieved through
many means. It thrives for feedback from all areas to help in the enhancement of their product by
information coming from retail employees, ambassadors, third party suppliers and athletes.
Retail employees can communicate the reviews they get from a product to management for it to
be closely studied, ambassadors are given the product to test and give feedback to the design
team. Conventions are also held to get feedback from athletes and consumers on product
enhancement and designs. Lululemon works closely with its suppliers to develop innovative

fabrics, over the course of years Lululemon and its suppliers have been able to be innovate
fabrics such as Luon, Soyla, Boolux, Silverescent, Vitaseaandwet.dry.warm.
Operation & Logistics
Lululemon retails their products through its stores and a small percentage through wholesale to
yoga studios and fitness centers. The products are being outsourced to approximately 50
manufacturers 90% of which are situated in Asia, and the other 10% in the Americas. Forecast of
inventory needs must be accurately estimated due to it being outsourced from countries far from
the distribution centers. Lululemon currently operates three distribution centers located in
Vancouver, Washington and Melbourne. This covers Canada, U.S. and Australia which are the
top 3 countries were they have the highest retail presence.
Human resources
Lululemon reported having 6,383 employees as of the last reporting fiscal. The employees are
expected to share the same vision as Lululemon. Employees are provided with many in-house
workshops such as self-development and goal setting to allow them to lead towards their long-
term objectives. Lululemon believes their employees are satisfied with the compensation they
receive for their employment and has offered them many means to keep their relationship
excellent with the employees.One is to offer them an option to purchase a limited amount of
stocks in the company at a 25% discount from fair market value.
Information Technology
Lululemon is highly dependent on its information system to operate its business.The system it
employs assists them to process transactions, inventory management, purchases, sales and
overall support a cost efficient operation. Lululemon has been able to enhance its image and sell
internationally through its website.Roughly 14% of the total revenue for 2012 came through its
Lululemon and Ivivva website. An advantage of selling through its website is that it allows
customers to purchase at any time, wide exposure, low overhead and helps in entering new
markets.

Strategic Alternatives
 Alternative 1: Create a mass market brand that is cheaper than Lululemon.
 Alternative 2: Offer sporting gear for main sports like soccer, basketball, baseball.
 Alternative 3: Offer yoga apparel wear for plus size active people.
 Alternative 4: Create a luxury brand to target high end consumers.
Analysis of Alternatives
Alternative 1
Create a mass market brand cheaper than “Lululemon” that offers yoga wear.
Pros
 Revenue and customer base will increase.
 A new brand becomes a new subsidiary in the company that can be sold for a profit.
 Lululemon has the knowledge and experience to create the products.
 The cost of startup would be less than it is for someone who is newly entering the
industry.
 A more diversified customer base in terms of income, age and employment.
 Can be sold through department stores and other private retail outlets if Lululemon
decides to not open exclusive stores.
 Reduce dependence from its Lululemon operation.
Cons
 Lower profit margin.
 Create a price war with competitors.
 It can have a negative effect on the brand “LULULEMON” that is currently successful.
 A new subsidiary will require investment in resources, staff and retail locations.
 Can affect the profitability of Lululemon, by customers shifting to its cheaper brand.
Alternative 2
Offer sporting uniform for main sports like soccer, basketball, baseball.
Pros
 Male customers can be targeted easily.

 Increases diversification of product line.
 Increases sales by selling to current and new customers.
 Increases revenue.
 Major sport events happen throughout the year that offer free marketing of the product.
 Customers buy sports uniform for more than just playing the sport, but for supporting the
game and wanting to be part of the sport by wearing the sports outfit.
 Reduce dependence from its yoga wear.
Cons
 Lululemon isn’t experienced in major sports uniform.
 Lululemon will need to change its marketing strategy to promote the product by
marketing the traditional way.
 A large investment is required.
 Lululemon will be competing with companies that have established themselves very
deeply in the industry.
Alternative 3
Offer yoga apparel wear for plus size active people.
Pros
 A new demographic of customers that arenot being catered by many other competitors.
 There arenot many competitors that currently offer fashionable plus size outfit.
 Increase in revenue.
 Higher probability of plus size women purchasing regularly to look good.
 Frequent purchases of new outfit due to weight loss from working out.
 Small investment is required.
Cons
 Current Lululemon customers maybe dissatisfied seeing obese people wearing
Lululemon.
 It can affect the brand image of the product, and make Lululemon lose its current
customer.
 Retail stores will need to change their layout to make space for the new selections.

 Obese customers can lose interest in fitness due to extreme challenges and slow results.
Alternative 4
Create a luxury brand to target high end consumers.
Pros
 Increase revenue and customer base.
 Lululemon possess all the infrastructure required for startup.
 High differentiation amongst competitors.
 No price war involved between competitors.
 Customers are upmarket clientele
 Higher profit margin.
 Customers have already had a connection with Lululemon and know the product.
 Entering a niche market is easily manageable than a mass market.
 Reduce dependence from the Lululemon brand
Cons
 Customer target is limited to high income earners.
 Lululemon customers might feel they’re not getting the best.
 Retail location set up will be expensive, due to location, and store design.
 Lululemon doesn’t have experience in the high-end apparel wear.
 There is an investment risk of being the first movers in a market of high-end yoga wear.
Strategic Recommendation
Lululemon’s IPO since 2007 has grown at a rate of 447%, making investment in yoga pants one
of the most profitable industries. Lululemon has no current or long-term debts in their balance
sheet, and hasnot declared any dividend, giving investors the confidence that they are in a growth
stage, and in hopes of maximizing shareholder wealth. The company has accumulated a vast
amount of knowledge, experience and resources to expand within the clothing industry.
Lululemon currently has $590 million dollars in its balance sheet allowing it to undertake many
business opportunities in the industry. Undertaking new business opportunities gives advantages
of diversifying the business by reducing reliance on current offerings and it maximizes
shareholders wealth.

The strategic recommendation that is best suited for Lululemon is to create a luxury brand to
target high-end customers. Lululemon started as a store targeting a niche market of people that
practice yoga but over the years Lululemon has transformed from being a niche product to a
product that has become appealing to the mass market. People were buying Lululemon not to do
yoga but because it has become a fashion trend and something to wear on a day to day basis.
Lululemon’s yoga wear has become a fashion wear and creating a high-end brand will satisfy the
needs of the customers that wear clothes to make them feel superior in wealth, and the sense of
having money. Customers that will be purchasing the high-end brand have already established a
connection with yoga wear by wearing Lululemon’s apparel and can be attracted easily to the
high-end brand. The benefits to Lululemon in getting into high-end market is that the investment
is not as high compared to other opportunities, and Lululemon will still be operating in a niche
market where growth can be easily controllable versus entering a mass market.
Lululemon currently has a very diverse customer base from high school students to active
moms.Many customers at Lululemon have lost the feel of exclusivity about the brand and the
only way they can get that sense back is for them to purchase a high-brand that only few people
can afford, and for customers that donot need feel the need for exclusivity will remain
purchasing the original Lululemon brand. The markets for high-end brands have been
experiencing growth even during recessions, and extremely high profit margins. Luxury high-
end products have been experiencing a dramatic growth and while common brand retailers are
experiencing a drop in their sales, luxury brands are on the rise. The luxury high-brand industry
is estimated to be worth $285 US billion dollars in 2012 and its forecasted that it will rise more
in the coming years.Research has shown developing countries such as China has accounted for
13% of the luxury brand purchases for 2013, and it is expected that it will grow by 20% in
2014.It is also estimated that sales for luxury brands is going to rise by 6% in the US, and 12% in
central and South America. The other advantage to luxury brands is that they compete in quality
and design and not in price and majority of the consumers that purchase luxury brands make over
$150,000 with a professional secure job. Lululemon should not compete in price but rather
should differentiate itself from its competitors through its products, entering the Luxury brand
market will not only make their profit margins higher but also make them the first movers of

exclusive yoga apparel in the luxury market. They were the first movers in the yoga inspired
athletic wear industry and they proved to be successful and the way the luxury brand industry is
headed, Lululemon will prove to be successful again.
Implementation
Lululemon currently has adequate cash and resources needed to fuel to start a brand aimed
towards luxury high-end customers. Lululemon can implement the strategy in 7 stages.Stage 1
will be to first create a brand name, logo and slogan under which it will be operating, this is one
of the most important stages in the business because your product will be identified by its brand
and it is something that will remain with the business for the life of it. The brand, logo and
slogan must integrate with the company’s mission and vision. Stage 2 of developing the strategy
is to recruit a team of designers that are experienced in luxury brand designing and make them
collaborate with Lululemon’s existing design team. With the experience of two diverse design
teams they must be able to create distinctive luxury yoga apparel that will make it stand out and
fit in a luxury high-end brand yoga apparel store. Stage 3 of the implementation is to find the
locations where the brand will be retailed at, commonly luxury brands are sold in areas of the
city where high income households are located. For example in Toronto the location that would
be most suitable for them is Yorkville, Toronto. This is where majority of all the upscale retailers
are situated in. Lululemon must first implement the strategy in 3 major cities that are populated
with the most high income households. Stage 4 is to put together a team of interior designers to
layout the store for the products. The layout of the store will be a physical representation of the
product; therefore the store design must be elegant and architecturally luxurious. Stage 5 is to
establish a marketing team solely for the brand, Lululemon can still use its grassroots strategy,
but it can include some traditional marketing strategies with it as well to assist it in being
recognized in the elite community. Stage 6 is to hire and train employees to work at the retail
locations, employees must be trained to assist the customers in the best manner. Stage 7 would
be the last part of the implementation process this can only happen when the product, store,
marketing and workforce have been successfully established. The opening of the store must be
grand with media coverage to publicize its opening.
Evaluation and control

Once the strategy has been executed, Lululemon must assess if the new strategy is taking the
corporation in the right direction. Lululemon must make sure that the new brand is earning the
expected amount, because at the end it all comes down to return on investment. A survey must
be completed by the company to see the level of satisfaction with the new brand amongst
customers. New customers must be offered a questionnaire to get feedback of the quality of the
product sold to them. Financial statements must be analyzed to see if profit and revenue is in an
upward trend. Return on investment, net income and revenue must also be compared with the
industry average. The overall outlook of the organization must be on a track to achieve their
short term and long term forecast. (Please refer to page 19 to view pro forma statement)
Financial Ratio & %
Rounded to the nearestnumber& days
Fiscal Year 2012 2011 2010
Liquidity Ratio
CurrentRatio 5.9 5.1 4.56
QuickRatio 4.47 4.01 3.81
Cash Ratio 4.43 3.96 3.71
Activity (daysortimes)
AssetTurnover 1.5 1.6 1.8
InventoryTurnover 4.7 5.3 6.2
Payable period 4 days 5 days 6 days
InventoryAge 78 days 68 days 58 days
Profitability
Gross profitMargin 56% 57% 56%
OperatingMargin 28% 29% 25%
NetProfitMargin 20% 19% 17%
Returnon Equity 36% 37% 39%
Returnon Assets 30% 30% 30%

External Factors Weight Rating
Weighted
Score
Comments
1 2 3 4 5
Opportunities
Internationalexpansion of its retail stores.
0.10 2.00 0.20
Lululemon has the potentialof
expanding in developed and
developing countries
Increase its product offering for male and youth
0.20 3.00 0.60
Lululemon increasing its male and
youth customer base, currently it
concentrates more on females.
Diversify its product offering.
0.20 2.00 0.40
Offer products for other sports
Acquisition of third party suppliers
0.05 1.00 0.05
Takeover major suppliers to reduce
dependence
Threats
Consumer spending going down
0.15 4.00 0.60
An impact in the economy can
affect consumer expenditure.
Losing market share to competitors
0.20 5.00 1.00
The industry of atheletics apparelis
highly competitive.
Counterfeiting of its product
0.10 2.00 0.20
Lululemon products can be
counterfeited and sold for cheaper
price.
Total Scores 1.00 3.05
Internal Factors Weight Rating
Weighted
Score
Comments
1 2 3 4 5
Strengths
They industry they
are in is
experiencing
growth.
0.10 4.00 0.40 Yoga practice is on the rise amongst many
societies
Loyal Customers 0.15 5.00 0.75 Lululemonpossess customers who are loyal
towards the product and brand.
Innovative in its
yoga apparel
0.05 4.00 0.20 The fabric and design of the product is
innovative.
High equity to debt
ratio
0.05 2.00 0.10 Lululemon does not have any major debt in its
balance sheets
Strong brand image 0.10 4.00 0.40 Lululemons is one of the well-known brands in
the market for yoga wear
Vertical retail
strategy
0.15 4.00 0.60 Products are retailed through corporate stores
Weaknesses
Lululemon does not
possess any patents
on its product
0.10 4.00 0.40 Product is not safeguarded frombeing
replicated by competitors.
The company relies
highly on yoga
apparelsales
0.15 5.00 0.75 Lululemon doesn’t have a high diversification
in the products it offers.
Grassroots
marketing is the
only method of
advertising
0.10 3.00 0.30 Lululemons only method of marketing is
grassroots marketing.
Retail exposure is
low, versus
competitors
0.05 2.00 0.10 Lululemons retailoutlets are limited, potential
customers might not have access to purchase
its product.
Total Scores 1.00 4.00

Lululemon-Luxury Subsidary
For 2013 through 2015
(all numbers in $000)
REVENUE 2013 2014 2015
Gross sales $7,665.00 $17,520.00 $23,360.00
Less sales allowances 229.95 525.60 700.80
Net Sales $7,435.05 $16,994.40 $22,659.20
COST OF SALES
Beginning inventory 0.00 167.00 200.00
Plus goods purchased /manufactured 1700.00 3704.00 4531.84
Total Goods Available 1700.00 3871.00 4731.84
Less ending inventory 167.00 200.00 230.00
Total Costof Goods Sold 1533.00 3671.00 4501.84
Gross Profit (Loss) 5902.05 13323.40 18157.36
OPERATING EXPENSES
Selling
Salaries and wages 810.00 1620.00 2240.00
Advertising 500.00 1000.00 1500.00
Depreciation 90.00 180.00 240.00
Rent of retail stores 2100.00 4200.00 5600.00
Other 90.00 180.00 240.00
Total Selling Expenses 3590.00 7180.00 9820.00
General/Administrative
Salaries and wages $450 $550 $600
Rent 5 5 5
Designing 450 450 550
Insurance 80 80 85
Office supplies 1 1 1
Total General/Administrative Expenses $986 $1,086 $1,241
Total Operating Expenses $4,576 $8,266 $11,061
$1,326 $5,057 $7,096
Taxes on income 0 0 0
Net Income Before Taxes $1,326 $5,057 $7,096

Year 1
Locations- 3 stores
Average Salesperstore $7000
Mark up500%
3% of salesallowance
6 Full time employeesperstore
Advertisingperstore $166000
Average rentperstore $700000
Corporate expense $0.9million
Year 2
Locations- 6 stores
Average salesperstore $8000
Mark up500%
Year 3
Locations- 8 stores
Average sales perstore $8000
Mark up500%

Bibliography
http://www.prnewswire.com/news-releases/yoga-journal-releases-2012-yoga-in-america-
market-study-182263901.html
http://www.statisticbrain.com/yoga-statistics/
http://www.internetworldstats.com/stats.htm
http://www.statisticbrain.com/total-online-sales/
http://management.fortune.cnn.com/2012/03/16/lululemon-christine-day/
http://www.fool.com/investing/general/2013/10/08/why-selling-yoga-pants-is-a-great-
business.aspx
http://www.investorschronicle.co.uk/2013/08/22/shares/news-and-analysis/live-the-high-life-
with-these-luxury-retailers-Q4Gh1AVFqIbeYZJACSAWjL/article.html
http://www.huffingtonpost.ca/2013/07/02/lululemon-see-through-lawsuit_n_3536713.html

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