June 19, 2007
Yoga Retailer Lululemon Going Public
By Tom Ryan
Lululemon, a rapidly-expanding upscale yoga retailer, promises to be the next hot retail IPO.
Founded in Vancouver in 1998, the company sells yoga-inspired apparel under the “lululemon athletica” brand name, primarily in its own high-end stores. As of June 1, it operated 57 in Canada and the U.S. Plans call for 20 to 25 stores openings in 2007, and 30 to 35 in 2008.
Net revenues catapulted from $40.7 million in 2004 to $148.9 million in 2006 – a 91.1 percent compound annual growth rate. During 2006, same-store sales increased 25 percent and stores open at least one year averaged sales of about $1,400 per square foot, which Lululemon believes is among the best in apparel retail.
What’s the key to its success?
According to its prospectus, founder Dennis “Chip” Wilson noticed an increasing number of women participating in sports, specifically yoga, and the concept directly addresses that void in the women’s athletic market. In its prospectus, management said it expects both yoga and broader fitness-related participation to continue to grow as a result of a “sustained shift toward health and well-being” on the part of women and men.
“We also believe longer-term growth in athletic participation will be reinforced as the aging Baby Boomer generation focuses more on longevity,” the prospectus said. “In addition, we believe consumer purchase decisions are driven by both an actual need for functional products and a desire to create a particular lifestyle perception. As such, we believe the credibility and authenticity of our brand expands our potential market beyond just athletes to those who desire to lead an active, healthy, and balanced life.”
Well beyond sport, the concept also taps into customers’ spiritual sides, specifically Lululemon’s earthy values and vision of “elevating the world from mediocrity to greatness.”
Much of the spirituality comes through Lululemon’s staff who share the company’s values. For many, their job is “an extension of their personal philosophy and lifestyle.”
Referred to as “educators”, many are fitness practitioners and all receive approximately 30 hours of in-house training to help explain the technical features of products to customers.
But employee training for Lululemon also involves personal development.
Each employee is encouraged to set goals “to reach their full professional, health and personal potential.” At least three quarters of its staff have written professional, health and personal goals and Lululemon offers programs such as personal development workshops and goal coaching to assist them in realizing their objectives. All have access to an updated library of business, leadership and personal development books.
With the help of its staff, stores are positioned as community hubs designed “to educate and enrich” customers. Each posts a community board featuring local yoga studios, athletic events and other information. The staff also serves as knowledgeable references for guests seeking information on fitness classes, instructors and events in the community.
The stores clearly evoke an upscale look and touches, including providing customers with fresh filtered water. But the enlightenment primarily comes from employees.
“We believe the energy and passion of our employees allow us to successfully execute on our business strategy, enhance brand loyalty and create a distinctive connection with our customers,” Lululemon said.
Through Goldman Sachs and Merrill Lynch, Lululemon plans to raise up to $200 million from the sale of shares in the U.S. and Canada.
Discussion
Questions: Why do you think Lululemon has been so successful so far? What do
you think of their efforts to reach consumers on a spiritual level? With only
15 stores here, what challenges will they face as they expand across the U.S.?
BrainTrust
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I have seen the Lululemon store recently pop up in the Columbus Circle area in Manhattan. Out of curiosity, I looked into the company, and thought what a great idea–a Yoga inspired lifestyle apparel store. After all, there are so many types of yoga or Pilates in the market.
With the general movement towards a better way of living and greater consciousness towards the environment, this retail company is evolving at the right time in the right places to cater to people that are involved lifestyle enhancing workouts. This is casual apparel to wear in or out of the gym.
I think Lululemon is definitely in line to be the next key apparel company. It is all about timing!
And of course, as with any interesting new idea, there will be copy cats, but the real challenge for Lululemon is to continue to grow and differentiate their business from those that will mimic them. And that requires not losing focus on their customer, and taking care of this customer.
I’m not familiar with this retailer, but it seems the company values their employees a great deal and views them as an asset to their brand and growth. Reading this immediately reminded me of the time I spoke with a few Wild Oats employees. They viewed their jobs as an extension of their lifestyle, which brought passion to their jobs and knowledgeable interactions with customers. I also saw this first hand from Barnes & Noble employees. They’re in a niche market at the right time and they’re targeting the right consumer segment for their products.
I believe that, as time goes on, adding a “spiritual” dimension to your products (even given how loose a term that is) will be a key to attracting a fairly significant minority of shoppers–especially aging Boomers. The closer a cohort moves toward death and the more valueless and therefore meaningless life in general becomes, the greater the appeal of the spiritual. Now, “spiritual” comes in all shapes and sizes from formal religion to save the earth sentiments and everything in between. My money says it will be a growing market for the next 20-30 years.
Lululemon has all the ingredients for an extremely successful run. It has a unique value proposition. It’s focused. Its staff and management team is motivated and well supported.
Yoga is rapidly growing in the US. It promotes health. (I haven’t had a cough or sniffle since I started about three years ago). It dramatically improved posture and flexibility. (Sometimes I find myself not slouching). It reduces aches and pains. (I haven’t been to chiropractor in two years after seeing them weekly for 15 years). It reduces stress. (I rarely lose it any more). It increases strength. (My golf drives are as long as they were 40 years ago.)
Plus it is cheap. You do it alone or with nice people in an nice atmosphere. And yes, there is a spiritual component.
Female Baby boomers have seized upon Yoga as they look to get back to their basics after the frenzy of their careers and raising children. But this will spread to all population segments through word of mouth. It is a natural for large work places which want to reduce their healthcare costs.
Lululemon will profit immensely.
It sounds like they have a great concept. However they must realize that the good times are about to be over and want to cash in and go public. Competitors envious of their success will try to copy them and probably water down future growth.
While Lululemon is doing well by the numbers, my experience in their stores has been disappointing. Though they make a big deal about their values and their staff, the store itself (and I have visited several though maybe some do it better than others) does not bring them out. The stores feel very flat and uninspiring. The product is well made but not is not easy to shop and find due to the manner in which it is displayed. You need an employee to not only help you find anything but to explain the difference between the many similar styles. Often their is no employee available to do so which then makes purchasing anything difficult to impossible. I have never found the staff to be enlightening in any manner though polite enough. Originally I thought this was a store with great potential. I have no doubt they will continue to make money because their is void in the market for this type of women’s apparel. But I believe an IPO will only help to bring about the demise of any originally or excitement in the concept.
Having shopped one of their stores extensively, I can attest to the execution of the key success factors highlighted in their prospectus. While we are certainly not lacking in performance athletic wear these days and the yoga apparel market includes strong competitors, Lululemon has gone the extra mile on several fronts. Without knowing anything about their strategy, values, etc. I found the store I shopped to be remarkable in several ways:
What I liked:
– Great store – well designed, enjoyable to be there.
– Great staff – the friendliest, most knowledgeable retail staff I have encountered in a long, long time; not pushy, just really helpful and pleasant to talk to – almost like being at a weekend social gathering.
– Great stuff – very high quality apparel, well designed.
What I didn’t like:
– the prices: you won’t find bargains here. However, given the quality of the merchandise, I felt the prices were fair and in line with that end of the market.
If they can maintain such a high quality of customer service and execution as they scale, they should do well. Yoga and other holistic health and fitness activities are growing beyond the expectations of most observers. We are becoming more a “well-curve” society with a shrinking middle class, less a “bell-curve” one. The growing numbers of very wealthy consumers is another supportive trend. The Wal-Mart shopper will not be buying much here.
It is easy to underestimate full market potential for Lululemon for a couple reasons:
– Lululemon are not just about Yoga. Yes, that is its roots but in Canada it is a fashion icon with a friendly/hip image. (Think Apple). It is not uncommon to see women, girls, and some men wearing Lululemon and that have never been near a Yoga mat.
– Lululemon sells running gear and clothing suitable for other forms of fitness (minus the sneakers)
– With an image that is earthy, philsophical, and cool – you can expect Lululemon to expand their product lines as the competition evolves.
The detractor for Lululemon is that growth and financial constraints of a public company will probably stunt or water-down the employee culture that makes it a unique experience today.
Estimates are that up to 20 million Americans regularly engage in yoga practice with an even greater number expected to give it a go for the first time this year. All told, consumers will spend in excess of $3 billion on classes, mats, clothing, books, and assorted sundry items. The market is certainly there but Lululemon will not be alone in attempting to capture it.
As a yoga enthusiast as well, I’m a fan of this company. It’s tapping into something more than a sport…it’s tapping into a lifestyle and a life approach. It sounds like Lululemon is living their promise and is going to inspire plenty of passion both within their company and with their brand enthusiasts. Will they be huge? For their niche, they have a great chance if they can stick to their values and ensure that the product and brand experience is stellar.
Stuart makes a great point, as it will be interesting to watch what happens to the culture and values of the company once public. I’ll be rooting for them!
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I have seen the Lululemon store recently pop up in the Columbus Circle area in Manhattan. Out of curiosity, I looked into the company, and thought what a great idea–a Yoga inspired lifestyle apparel store. After all, there are so many types of yoga or Pilates in the market.
With the general movement towards a better way of living and greater consciousness towards the environment, this retail company is evolving at the right time in the right places to cater to people that are involved lifestyle enhancing workouts. This is casual apparel to wear in or out of the gym.
I think Lululemon is definitely in line to be the next key apparel company. It is all about timing!
And of course, as with any interesting new idea, there will be copy cats, but the real challenge for Lululemon is to continue to grow and differentiate their business from those that will mimic them. And that requires not losing focus on their customer, and taking care of this customer.
I’m not familiar with this retailer, but it seems the company values their employees a great deal and views them as an asset to their brand and growth. Reading this immediately reminded me of the time I spoke with a few Wild Oats employees. They viewed their jobs as an extension of their lifestyle, which brought passion to their jobs and knowledgeable interactions with customers. I also saw this first hand from Barnes & Noble employees. They’re in a niche market at the right time and they’re targeting the right consumer segment for their products.
I believe that, as time goes on, adding a “spiritual” dimension to your products (even given how loose a term that is) will be a key to attracting a fairly significant minority of shoppers–especially aging Boomers. The closer a cohort moves toward death and the more valueless and therefore meaningless life in general becomes, the greater the appeal of the spiritual. Now, “spiritual” comes in all shapes and sizes from formal religion to save the earth sentiments and everything in between. My money says it will be a growing market for the next 20-30 years.
Lululemon has all the ingredients for an extremely successful run. It has a unique value proposition. It’s focused. Its staff and management team is motivated and well supported.
Yoga is rapidly growing in the US. It promotes health. (I haven’t had a cough or sniffle since I started about three years ago). It dramatically improved posture and flexibility. (Sometimes I find myself not slouching). It reduces aches and pains. (I haven’t been to chiropractor in two years after seeing them weekly for 15 years). It reduces stress. (I rarely lose it any more). It increases strength. (My golf drives are as long as they were 40 years ago.)
Plus it is cheap. You do it alone or with nice people in an nice atmosphere. And yes, there is a spiritual component.
Female Baby boomers have seized upon Yoga as they look to get back to their basics after the frenzy of their careers and raising children. But this will spread to all population segments through word of mouth. It is a natural for large work places which want to reduce their healthcare costs.
Lululemon will profit immensely.
It sounds like they have a great concept. However they must realize that the good times are about to be over and want to cash in and go public. Competitors envious of their success will try to copy them and probably water down future growth.
While Lululemon is doing well by the numbers, my experience in their stores has been disappointing. Though they make a big deal about their values and their staff, the store itself (and I have visited several though maybe some do it better than others) does not bring them out. The stores feel very flat and uninspiring. The product is well made but not is not easy to shop and find due to the manner in which it is displayed. You need an employee to not only help you find anything but to explain the difference between the many similar styles. Often their is no employee available to do so which then makes purchasing anything difficult to impossible. I have never found the staff to be enlightening in any manner though polite enough. Originally I thought this was a store with great potential. I have no doubt they will continue to make money because their is void in the market for this type of women’s apparel. But I believe an IPO will only help to bring about the demise of any originally or excitement in the concept.
Having shopped one of their stores extensively, I can attest to the execution of the key success factors highlighted in their prospectus. While we are certainly not lacking in performance athletic wear these days and the yoga apparel market includes strong competitors, Lululemon has gone the extra mile on several fronts. Without knowing anything about their strategy, values, etc. I found the store I shopped to be remarkable in several ways:
What I liked:
– Great store – well designed, enjoyable to be there.
– Great staff – the friendliest, most knowledgeable retail staff I have encountered in a long, long time; not pushy, just really helpful and pleasant to talk to – almost like being at a weekend social gathering.
– Great stuff – very high quality apparel, well designed.
What I didn’t like:
– the prices: you won’t find bargains here. However, given the quality of the merchandise, I felt the prices were fair and in line with that end of the market.
If they can maintain such a high quality of customer service and execution as they scale, they should do well. Yoga and other holistic health and fitness activities are growing beyond the expectations of most observers. We are becoming more a “well-curve” society with a shrinking middle class, less a “bell-curve” one. The growing numbers of very wealthy consumers is another supportive trend. The Wal-Mart shopper will not be buying much here.
It is easy to underestimate full market potential for Lululemon for a couple reasons:
– Lululemon are not just about Yoga. Yes, that is its roots but in Canada it is a fashion icon with a friendly/hip image. (Think Apple). It is not uncommon to see women, girls, and some men wearing Lululemon and that have never been near a Yoga mat.
– Lululemon sells running gear and clothing suitable for other forms of fitness (minus the sneakers)
– With an image that is earthy, philsophical, and cool – you can expect Lululemon to expand their product lines as the competition evolves.
The detractor for Lululemon is that growth and financial constraints of a public company will probably stunt or water-down the employee culture that makes it a unique experience today.
Estimates are that up to 20 million Americans regularly engage in yoga practice with an even greater number expected to give it a go for the first time this year. All told, consumers will spend in excess of $3 billion on classes, mats, clothing, books, and assorted sundry items. The market is certainly there but Lululemon will not be alone in attempting to capture it.
As a yoga enthusiast as well, I’m a fan of this company. It’s tapping into something more than a sport…it’s tapping into a lifestyle and a life approach. It sounds like Lululemon is living their promise and is going to inspire plenty of passion both within their company and with their brand enthusiasts. Will they be huge? For their niche, they have a great chance if they can stick to their values and ensure that the product and brand experience is stellar.
Stuart makes a great point, as it will be interesting to watch what happens to the culture and values of the company once public. I’ll be rooting for them!