Lululemon Athletica Inc. Case Study - Desklib

This case study discusses Lululemon Athletica Inc., a Canadian athletic apparel retailer. It covers the company's outstanding shares, stock exchanges, financial forecast, CEO, profitability, and core competencies. The study also uses Porter's five forces framework to analyze the profitability of the activewear industry.

Running head: LULULEMON ATHLETICA INC. CASE STUDY
Lululemon Athletica Inc. case study
Name
Institution

LULULEMON ATHLETICA INC. CASE STUDY 2
Lululemon Athletica Inc.
Lululemon Athletica inc is a Canadian athletic apparel retailer. Lululemon is a self-described
yoga-inspired athletic apparel company for women and men. The company makes a variety
of types of athletic wear, including performance shirts, shorts, and pants, as well as lifestyle
apparel and yoga accessories. The company was originally based in Canada, but has
expanded to sell its products internationally in both store fronts and online.

LULULEMON ATHLETICA INC. CASE STUDY 3
Case study questions:
1. Use Orbis databases (see Tutorial 1) and locate the following information for Lululemon
Athletica Inc (8*1 marks = 8 marks):
1.1. Number of outstanding shares and their nominal value (current stock data):
Lululemon Athletica Inc. had an outstanding shares of 18,200,000 with a nominal value of
$327,600,000 as of 25th April, 2019.
1.2. List of stock exchanges that the company is listed at and stock indexes that the company
is included into:
The Company is listed in three main stock markets. First, the U.S. Nasdaq stock exchange
market as LULU: US. Second, the London Stock Exchange market as of 0JVT. And third, the
Canadian stock market as TSE:LLL (Thomas, 2018).
1.3. The list of top 3 shareholders of the company with direct ownership:
 FMR LLC with 18,394, 136 shares
 Advent International Corp/ MA with 10,105,279 shares
 Vanguard Group Inc. with 9,549,672 shares.
1.4. Financial forecast for EPS for 31/01/2022 (in USD):
EPS at the end of January 31st 2022 is projected to range between $6.1 and $6.53.
1.5. The name of the Chief Executive Officer:
Calvin McDonald is the current CEO of Lululemon Inc.
1.6. The company’s total assets and shareholder funds as at 28/01/2018
USD
 Total assets: $ 1,998,483,000.
 Shareholder funds: $ 1,596,960,000
1.7. Average Price/earnings ratio (28/01/2018), average earnings yield (28/01/2018), average
price/cash flow ratio (28/01/2018):
 Average Price/earnings ratio: 48.81
 Average earnings yield: 1.32
 Average price/cash flow ratio: 44.91
1.8. Number of employees for the company (current):
Lululemon Inc. has 15,700 employees.

LULULEMON ATHLETICA INC. CASE STUDY 4
Use the information provided in the case study to answer the following questions:
2. Discuss profitability of the activewear industry by discussing application of Porter’s
five forces framework
(5 *2 + 2 marks = 12 marks; word limit: 500 words max)
Use the table below to record your answer
Force Low/Medium/High Brief explanation of the rating of the force
Existing
competition
High Lululemon Athletica face a high level of competition
in the Activewear industry. The products from Lulu
are priced higher than those from competing firms.
The major competitors in the market are Under
Armour and Athleta (Gamble, 2011).
Threat of
new entrance
Medium First, there is a high capital requirement to start up
and operate in the industry. Second, strict
government policies on licensing and legal
requirements make are hard for a new entrant to join
the market. Third, the existing firms enjoy
economies of scales which give them a cost
advantage making it hard for new entrants to operate
in the industry. Moreover, there is a high production
differentiation, high standards of customer service
and products quality which weakens the
competitiveness of new entrants. However, new
entrant enjoys ease to create a distribution channel
(Wilson, 2018).
Threat of
Substitute
products
Low The Activewear industry has few substitute products.
However, the available substitutes are produced by
small companies with low profitability level. Such
companies cannot compete with Lululemon
Athletica Inc. Moreover, other companies provide
more expensive quality products. Therefore,
consumers are less likely to forgo Lululemon
products for substitute products. The threat of
substitute products is low (Wilson, 2018).
Bargaining
power of
buyers
Low A low buyers’ bargaining power is attributed by
several factors. First, there are many buyers and few
firms in the industry. Therefore, buyers have no
control over product price. Second, product
differentiation high making it difficult for buyers to
control product price. Third, it is difficult for buyers
to switch from one firm to another. Fourth, buyers
are ready to pay any price as far as the quality of the
products is guaranteed.
Bargaining
power of
suppliers
Low Low bargaining power of suppliers in attributing to;
one, few firms and many suppliers. Two, low
purchase cost. Lululemon can easily switch to a
supplier with a low price. Three, firms have several

LULULEMON ATHLETICA INC. CASE STUDY 5
suppliers located in different locations. Lastly, firms
have formed mutual relationships with their
suppliers.
Overall
profitability
High The profitability of a firm is measured using the
profitability score based on the attractiveness of its
stocks. The current profitability score of Lululemon
Athletica Inc. Is nine (9) which is higher compared
to other firms operating in the Activewear industry.
Based on the profitability score, Lulu has a higher
overall profitability compared to its peers.
3. Identify five key core competencies behind Lululemon competitive strategy.
(5*2 marks = 10 marks; word limit: 400 words max)
Lululemon Athletica Inc. Success is based on core competencies such as brand extensions,
recombination, efficiency, market development and technology/ Digital innovation.
Key success factors / core
competencies
Brief explanation
Brand Extension First, the firm has a Fitness Membership program which
promotes the provision of fitness services. Second, Lulu
has a customer loyalty program that reward repeat shoppers
and increase customer loyalty (Brennan, 2011).
Recombination The core competency is fulfilled in three ways. First,
Lululemon engages in positive body campaign to promote
active and healthy lifestyles. For example, the company
engaged in the ‘Fat-talk’ campaign to encourage fat people
take part in fitness activities. Second, Lululemon Athletica
publishes Fitness and Health magazines annually to
promote its services to its customers. Third, the company
acquired Luon Fabric Company to reduce operating cost
and increase quality (Gamble, 2011).
Efficiency The Company achieve efficiency in three ways. First, Lulu
engages in Corporate Social Responsibility Through
donations and charities to promote fitness and healthy
living. The company has launched products to be sold
through CSR campaigns (Quiroz, 2018). 20% of the profit
realized from the products goes to CSR. Second, enhanced
product quality have also contributed to the company’s
success. Lulu established a product quality testing unit
which is tasked with minimizing the rate of product recalls.
Third, expansion into the men’s market increases the
company’s competitiveness. Lulu is further seeking to
produce sports gears, winter wear, and shoes (Gillo, 2016).

LULULEMON ATHLETICA INC. CASE STUDY 6
Market Development First, Lululemon Athletica has expanded its brand to
producing products for professional athletes. The products
in this category target professional surfers, basketball
players, Olympians, and track athletes. Second, the
company engages customers in the creation of new
products. The idea is to satisfy the needs of new customers
and keep the products relevant among them. Third, the
company uses its economies of scale to produce low-cost
products for low earning consumers (Gamble, 2011).
Technological/ Digital
innovation
Lululemon Athletica has incorporated technological
innovation to push its design vision. The industry is
becoming more competitive; hence technology influences
the success of Lululemon Inc (Schlegelmilch, 2016).

LULULEMON ATHLETICA INC. CASE STUDY 7
References
Brennan, B. (2011). Why She Buys: The New Strategy for Reaching the World's Most
Powerful Consumers. New York: Crown Publishing Group.
Carr, M. G. (2014). Guide to Fashion Entrepreneurship: The Plan, the Product, the Process.
New York: A&C Black.
Gamble, J. E. (2011). Essentials of Strategic Management: The Quest for Competitive
Advantage. New York: McGraw-Hill Irwin.
https://risnews.com/three-keys-success-lululemon. (2016, Dec 15). The Three Keys to
Success at lululemon . Retrieved from RIS: https://risnews.com/three-keys-success-
lululemon
Quiroz, M. A. (2018, Jan 8). A Growth Strategy for Lululemon 2018. Retrieved from Medium
Corporation: https://medium.com/@michaelangelo_q/a-growth-strategy-for-
lululemon-68819680e511
Schlegelmilch, B. B. (2016). Global Marketing Strategy: An Executive Digest. London:
Springer.
Thomas, L. (2018, August 30). Lululemon shares soar as earnings, sales top expectations.
Retrieved from CNBC: https://www.cnbc.com/2018/08/30/lululemon-earnings-q2-
2018.html
Wilson, C. (2018). Little Black Stretchy Pants. Toronto, Canada: RosettaBooks.