Newman_Forecasting

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Trine University *

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Apr 3, 2024

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1 Trine University Financial Forecasting lululemon Macy Newman FIN 5063: Corporate Finance Dr. Dana Leland 10 September 2023 Brand Background:
2 Lululemon has been rapidly growing in brand awareness across the athletic wear industry, but who are they? Lululemon says, “We offer a comprehensive line of performance apparel, footwear, and accessories marketed under the lululemon brand. Our apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other activities” (2022). They use quality fabric and styles that help the consumer feel good while wearing their products. Apparel is what they are known for, but they have also branched out into fitness memberships through a subscription with lululemon Studio. They work closely with what their consumers want and continue to sell at a premium price, creating a thriving business. By working with their consumers, they have learned that the people they are trying to reach, “seek a combination of performance, style, and sensation in their athletic apparel, choosing products that allow them to feel great however they exercise” (2022). They are reaching people who are looking to live a particular lifestyle and it can be provided by a creditable brand. With this being said let’s discuss what channels they are successful in. In 2020 they saw 38% of the revenue from company operated stores, 52% from direct-to-consumer sales, and the last 10% is in the miscellaneous/other category. In 2021 lululemon saw 45% of revenues coming from company operated stores, 44% in direct-to-consumer sales, with the last 10% in other. In 2022 they saw 45% of sales in company operated stores, 46% in direct-to-consumer sales, and 9% in other. What does this mean for the company? It means they are staying constant but have also began growing into brick-and-mortar sales expanding the company outreach. They are currently found in 18 countries across the globe, with 655 stores, 350 of those being in the
3 United States. In 2015 they found themselves making $1,580 in sales per square foot of their stores. Financial Forecast: After reviewing the income statements provided by lululemon they are forecasting to continue to increase in gross profits and revenue until 2030. I looked at the best-case scenario and it seems hopeful from here. I found that finding the difference between two periods, divide the difference by the first period to get a decimal and then multiplied it by 100 to get a percentage. Through this there were fluctuating increasing in both gross profit and revenues. They have not moved into 2023 so the information here is from 2029-2022. From 2019 to 2020 there was a 10.8% increase in gross profits, from 2020-2021 there was a 46.5% increase in gross profits, and in 2021-2022 there is a 24.5% increase in gross profits. With that, looking at an average, there should be roughly a 27.27% increase in all areas in the following year. What this means for lululemon is that they are looking at a positive increase in sales throughout the organization. This organization has been booming for the past 5-7 years and it has shown in the fashion industry. As we know it is a very luxury high class brand that attracts a huge market. The numbers here show the amount of profit Lulu can expect in the coming years. The company started with pop up shops and now you can start to see several different locations throughout the entire country. This 27% increase is going to benefit this company a huge amount especially when looking at their gross profit growth for the coming years.
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