LuluLemon Analysis -- Final Version.docx Table of Contents BACKGROUND: 2 IDENTIFICATION: 2 ANALYSIS: 3 SWOT ANALYSIS: 5 RECOMMENDATIONS 5 Making investments into wearable technology: 6 Expand Stores but Focus on New Markets: 6 Diversify product line to include lower priced products: 6 BACKGROUND: Lululemon Atheletica Inc. is an athletic apparel company that designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. The business was founded in 1998, by Chip Wilson and is based in Vancouver, Canada. The company is broken in to two major segments, company owned brick and mortar retail stores and online store that sells direct to consumers. The company sells a variety of athletic products, ranging from athletic apparel, like yoga pants and athletic tops, to fitness-related accessories, like yoga mats and water bottles. As of January 2016, the company operates over 360 stores across multiple countries including the United States, Canada, Australia, New Zealand, the United Kingdom, Singapore, Hong Kong, Germany, and Puerto Rico. At the end of 2016, the company reported $2.06 Billion in revenues a 14.6% increase from last year. The company continues to remain profitable with a net income making up 12.9% of revenue in 2016, and 13.3% of revenue in 2015. Strong growth is forecasted into the future as the sports apparel market is expected to reach an annual revenue of $171 billion dollars in the near future.IDENTIFICATION: Lululemon faces fierce competition in the apparel market, major competitors like Nike and Under Amour continue to fight for market share in the hopes of diverting Lululemon’s customers into their own respective stores. Because of this fierce competition Lululemon has adopted a strategy that focuses on multiple key components: 1. Marketing a lifestyle rather than a product a. By focusing their marketing campaign on the lifestyle the company is trying to provide, instead of the product itself, they are able to charge a premium for their product. This allows them to charge over $60 for some of their shirts, creating wide margins on their products. 2. Focusing on the yoga athletic market, a very specific niche market a. This has proved to be a very smart strategy for the company as it has allowed themselves to differentiate themselves from competition like Under Amour and Nike. 3. Focusing on a vertical retail model that emphasizes small stores a. There are two major components to this strategy. The first being that the company has very few franchises, so they are able to control consistency across 100 of stores. Second, they focus on stores that are sometimes half the size of the competition. The trade-off of having smaller stores is that they are able to have sales per square foot of $1700 in their corporate stores, compared to Gaps and Abercrombie & Fitch which trail below $500. 4. Purchasing minimal marketing but instead focuses building relationships with local Yoga ...

1. LuluLemon Analysis -- Final Version.docx
Table of Contents
BACKGROUND: 2
IDENTIFICATION: 2
ANALYSIS: 3
SWOT ANALYSIS: 5
RECOMMENDATIONS 5
Making investments into wearable technology: 6
Expand Stores but Focus on New Markets: 6
Diversify product line to include lower priced products: 6

2. BACKGROUND:
Lululemon Atheletica Inc. is an athletic apparel company that
designs, distributes, and retails athletic apparel and accessories
for women, men, and female youth. The business was founded
in 1998, by Chip Wilson and is based in Vancouver, Canada.
The company is broken in to two major segments, company
owned brick and mortar retail stores and online store that sells
direct to consumers. The company sells a variety of athletic
products, ranging from athletic apparel, like yoga pants and
athletic tops, to fitness-related accessories, like yoga mats and
water bottles. As of January 2016, the company operates over
360 stores across multiple countries including the United States,
Canada, Australia, New Zealand, the United Kingdom,
Singapore, Hong Kong, Germany, and Puerto Rico. At the end
of 2016, the company reported $2.06 Billion in revenues a
14.6% increase from last year. The company continues to
remain profitable with a net income making up 12.9% of
revenue in 2016, and 13.3% of revenue in 2015. Strong growth
is forecasted into the future as the sports apparel market is
expected to reach an annual revenue of $171 billion dollars in
the near future.IDENTIFICATION:
Lululemon faces fierce competition in the apparel market, major
competitors like Nike and Under Amour continue to fight for
market share in the hopes of diverting Lululemon’s customers
into their own respective stores. Because of this fierce
competition Lululemon has adopted a strategy that focuses on
multiple key components:
1. Marketing a lifestyle rather than a product
a. By focusing their marketing campaign on the lifestyle the
company is trying to provide, instead of the product itself, they
are able to charge a premium for their product. This allows
them to charge over $60 for some of their shirts, creating wide
margins on their products.
2. Focusing on the yoga athletic market, a very specific niche

3. market
a. This has proved to be a very smart strategy for the company
as it has allowed themselves to differentiate themselves from
competition like Under Amour and Nike.
3. Focusing on a vertical retail model that emphasizes small
stores
a. There are two major components to this strategy. The first
being that the company has very few franchises, so they are able
to control consistency across 100 of stores. Second, they focus
on stores that are sometimes half the size of the competition.
The trade-off of having smaller stores is that they are able to
have sales per square foot of $1700 in their corporate stores,
compared to Gaps and Abercrombie & Fitch which trail below
$500.
4. Purchasing minimal marketing but instead focuses building
relationships with local Yoga Studios
a. Instead of spending money on television ads and other
marketing material the company has instead decided to focus on
building and strengthening relationships with yoga studios
located around their stores.
The overall brand value of Lululemon experienced strong
growth in the early decade of 2010. However, over the last few
years the company has slowly seen a decline in its overall brand
value. While it is hard to pinpoint exactly what was the cause of
such a major decrease in their value, it can serve as an indicator
that the brand may be suffering.
Revenue growth is expected to grow well into the future, with
revenues projected to exceed $5 billion dollars by 2022. This
would be more than double at its current value. Below we have
provided a graph showing the trend in revenue growth.
Lululemon’s customer segment can be broken into the following
categories with each category taking making up a percentage of
the total purchasers.

4. The company has primarily focused on targeting women this has
proved effective, but at the same time it leaves a major market
on the sideline who’s needs aren’t being met.ANALYSIS:
Overall, Lululemon is a strong company with the opportunity
for major growth in the future. However, internal efforts must
be made to ensure that the company is positioned to capture
changing consumer trends and also is able to compete in the
fragmented apparel market. From a financial perspective the
company seems to be very healthy. Their net margin is 4%
higher than the industry average and this is thanks to the
premium price that they charge on their products. Along with
this the company has no debt on its balance sheet which makes
the company very well positioned from a leverage standpoint.
The table below highlights some of the key margins that stand
out for Lululemon:
FY 2015
FY 2016
Industry Average
Gross Margin
50.9%
48.4%
48.1%
Operating Margin
20.9%
17.9%
15.2%
Net Margin %
13.3%
12.9%
9.0%
Quick Ratio

5. 4.24
2.28
0.53
Financial Leverage
1.19
1.28
0.62
Beyond a financial standpoint, the company has engaged in
numerous efforts to differentiate its brands and its products.
Many of its customers treat the brand as a lifestyle, conveying a
healthy lifestyle that they abide by. This unique branding has
allowed Lululemon to charge a premium for its products and
help grow its bottom line. Along with this, the company is
continuing to put out new products that keep the brand relevant
and keeps their customers coming back for more. The company
has demonstrated strong growth over the years, however, that
growth has been limited to only a few countries. This limited
market share is both a weakness and an opportunity. The
company will need to effectively navigate the global market in
order to capture some of this growing market, otherwise
competitors like Nike and Under Amour will steal it from them.
By 2018, the global sports apparel market is forecasted to grow
to $171 billion, that’s a $13 billion increase from 2016.
Data provided by Statista
A major concern risk that faces Lululemon is its reliance on its
suppliers overseas. If any of these suppliers implement major
changes into their prices they could have a material impact to
Lululemon’s bottom line. Along with a potential risk related to
their suppliers, Lululemon also suffers from cyclical trends that
impact consumer spending. During periods of low wage growth,

6. the company may experience a decline in sales if consumer is
unable to afford the premium that is placed on the product. A
future concerns the company will have to deal with is the fact
that the market is changing more towards wearable tech, a trend
the company has yet to catch on to. If the company is unable to
catch on to this trend, then there is a real possibility that market
share could be loss to competitors like Nike and Under Amour.
Below we have provided a SWOT analysis table that gives a
more comprehensive overview of some of the topics we have
mentioned above.
SWOT ANALYSIS:
Strength
Weakness
1. Limited global penetration despite high quality apparels
2. Brand recall is less as compared to international players
1. The company is continuously producing new styles of sports
apparel for men and women.
2. It is joining up with fashion designers to produce new
clothing styles and widen their product lines
3. The company has a large presence
4. Marketing strategy limits company’s expenses.

7. Internal
1. The world sports apparel industry is expected increase
manifold
2. The market is driven by a trend toward healthier, more active
lifestyles, with older demographics and women becoming more
active
3. Better reach and penetration into emerging economies.
Threat
Opportunity
External
1. Sports clothing industry is highly fragmented, with many
brands competing, from basic discount brands to high-end
fashion names
2. Challenges faced by sports apparel companies include
constantly changing fashion trends, tough competition and more
price-conscious shoppers

8. The company has a large presence
Marketing strategy limits company’s expenses.
RECOMMENDATIONS
Based on our analysis above, we have broken down our
recommendation into the following components:
1. Compete with the competition by making investments into
wearable technology products.
2. Continue to expand the number of stores, but begin to focus
on new markets where apparel growth is strong.
3. Diversify your customer base by introducing more price
conscious products.
4. Begin reaching out to menMaking investments into wearable
technology:
Given how the market is changing for apparel it is crucial that
Lululemon adopts products that fit consumers changing taste.
Competitors like Under Amour are making large investments
into researching wearable technology. We recommend that
Lululemon do the same. This way they continue to attract new

9. consumers, ensure that they have products with high margins
into the future, and have products that they can continue to use
to compete with other competitors.Expand Stores but Focus on
New Markets:
It is no surprise that markets like China hold enormous
opportunity for companies like Lululemon. Rising incomes and
strong growth in the purchase of premium products makes China
an ideal market for Lululemon. However, the company must
proceed with caution before entering markets. They have to
ensure that they understand the consumer taste that exist in
those markets and make sure that they adapt their products as
necessary. If they fail to take the proper step of researching
these markets, the company could put at risk its financial health
and its market base in already existing markets.Diversify
product line to include lower priced products:
Lululemon has been successful at being a brand that is able to
charge a premium for its products. However, as their growth
slows because of the reality that their market is limited in the
number of high-end consumers that exist, they will need to
expand into lower-end markets. Our belief is that the company
should begin to explore lower price products that will appeal to
a new market that is not currently served by Lululemon. While
the brand has advertised a lifestyle, we believe that expanding
that image to a broader market base would allow Lululemon to
capture more customers.
Reach Out to Men:
Currently, the company has a limited following of men as its
customers. We believe that the company should expand efforts
to capture men as customers by introducing products that appeal
to them and incorporating clothing lines that are specifically
designed for men. Our belief is that the company would be able
to continue marketing itself as a lifestyle brand and wouldn’t
put at risk the image it already maintains with the public.

10. References
Lululemon Athletica. (2016, October 4). About Us: Lululemon.
Retrieved from Lululemon: http://www.lululemon.com
Statista. (2016, October 4). Lululemon Athletica. Retrieved
from Statista: http://www.Statista.com
Thompson, A. (2016). Craftign & Executing Strategy: A Quest
for Competitive Advantage. New York: McGraw Hill.
Net revenue of Lululemon worldwide from 2008 to 2022
(in million U.S. dollars)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E
2019E 2020E 2021E 2022E 353.59 452.9
711.7 1000.84 1370.36 1591.19 1797.21
2060.52 2650 3250 3710 4080 4460 4810 5170

11. Customer Segment, by Percentage.
Women Joint Men 0.9 0.02 0.08
Total revenue of the global sports apparel market 2011-2018
(in billions of USD)
2011 2012 2013 2014 2015 2016 2017E 2018E 132 135
141 146 152 158 165 171
Brand value of Lululemon from 2012 to 2015
(in million U.S. dollars)
2012 2013 2014 2015 1350 1692 1545 1149
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