Lululemon Case Essay examples

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CASE 6

lululemon athletica, Inc.

Arthur A. Thompson
The University of Alabama

I

n early 2012, investor interest in lululemon athletica— a designer and retailer of high-end, yoga-inspired athletic apparel under the lululemon athletica and ivivva athletica brand names—was surging. Over the past 30 months, growing numbers of female shoppers were patronizing the company’s stores to pay premium prices for lululemon-branded items that offered performance, fit, and comfort and were stylish as well. The company’s functional and stylish apparel had taken on
“must have” status among growing numbers of fitnessconscious women. People were flocking to lululemon stores not only because of the fashionable products but also because
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Wilson also saw the company’s mission as one of providing people with the components to live a longer, healthier, and more fun life.
Several new stores were opened in the Vancouver area, with operations conducted through a Canadian operating company, initially named Lululemon
Athletica, Inc. and later renamed lululemon canada inc.
In 2002, the company expanded into the United States and formed a sibling operating company, Lululemon
Athletica USA Inc. (later renamed as lululemon usa, inc), to conduct its U.S. operations. Both operating companies were wholly owned by affiliates of Chip
Wilson. In 2004, the company opened a franchised store in Australia as a means of more quickly disseminating the lululemon athletica brand name, conserving on capital expenditures for store expansion, and boosting revenues and profits. The company wound up its fiscal year ending January 31, 2005 with 14 company-owned stores, 1 franchised store, and net revenues of $40.7 million. A second franchised store was opened in Japan later in 2005. Franchisees paid lululemon a one-time franchise fee and an ongoing royalty based on a specified percentage of net revenues; lululemon supplied franchised stores with garments at a discount to the suggested retail price.
Five years after opening the first retail store, it was

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