Lululemon Athletica

Lululemon Athletica Incorporation
Public
Traded as NASDAQ: LULU
Industry Athletic Clothing
Founded 1998
Founder Chip Wilson
Headquarters Vancouver, British Columbia, Canada
Number of locations
 211 (March 2013)[1]
Area served
 Canada, United States, Australia and New Zealand
Key people
 Laurent Potdevin (CEO)
Products Athletic Apparel and Accessories
Revenue Increase US$1.37 Billion (FY 2013)[1]<
Increase US$376.4 Million (FY 2013)[1]
Increase US$271.4 Million (FY 2013)[1]
Total assets Increase US$734.6 Million (FY 2012)[2]
Total equity Increase US$606.1 Million (FY 2012)[2]
Number of employees
 2861
Divisions Lululemon Athletica
OQOQO
Ivivva Athletica
Slogan Creating components for people to live longer, healthier, more fun lives
Website www. lululemon.com

Lululemon Athletica Inc. (/ˌluːluːˈlɛmən/), styled as lululemon athletica, is a self-described yoga-inspired athletic apparel company, which produces a clothing line and runs international clothing stores from its company base in Vancouver, British Columbia, Canada.

Company history

The Lululemon Athletica store in Westport, CT

Dennis "Chip" Wilson founded Lululemon Athletica (usually referred to simply as "lululemon" or "lulu") in 1998 in response to increased female participation in sports and in accordance with his belief in yoga as the optimal way to maintain athletic excellence into an advanced age.

Wilson opened the first Lululemon store in Kitsilano, a Vancouver neighbourhood. It included a design studio, a retail store, and shared space with a yoga studio. Lululemon operates approximately 201 stores, with the majority in North America. Lululemon also operates stores in Australia and New Zealand. There are also showrooms in Hong Kong and Great Britain. In addition, Lululemon is sold at fitness studios including Physique 57, Equinox, CorePower Yoga, Pure Barre and more.

On August 11, 2001, the company started selling Fashion Active Lab (FAL), a line with its roots in New York, at TNT in Toronto, and the Vancouver store Lululemon Athletica, which specialized in yoga wear.[3]

On October 28, 2002, when opening a new store, the company organized "naked passes" competition guaranteeing participants a chance to bare all for free yoga wear.[4]

In fall 2009 the company launched Ivivva Athletica, a new subsidiary targeting girls from ages 6 to 12. Ivivva Athletica was announced by Lululemon in September 2009. Ivivva started with the opening of three stores in December 2009. As of October 2012, Ivivva has 14 locations – mostly located in Lululemon's principal markets in Canada and the United States.

In 2005, Advent International (partnered with Highland Capital Partners), a U.S. private equity firm, bought a 48% minority interest in Lululemon for a reported C$225 million, and former Reebok chief executive officer Robert Meers became the new Lululemon CEO. Wilson, the founder, now has 42% ownership, with retail staff owning 10% in stocks and shares. The company formed a partnership with Descente to oversee Lululemon's Japanese operations; however, in mid-2008, Lululemon closed its Japanese operations (three stores) to focus on the North American market. Christine Day, a former Co-President of Starbucks International, became chief executive officer of Lululemon in December 2010. On June 10, 2013, it was announced Day would leave her position,[5] and she is expected to be replaced by Laurent Potdevin in January 2014.[6]

Lululemon Athletica announced an initial public offering in May 2007 and became a public company on July 27, 2007. Chip Wilson rang the opening bell on the NASDAQ exchange in the United States that day.[7]

The Retail Council of Canada recognized the company as the 2003 Innovative Retailer of the Year in its "small store" classification.[8]

In December 2010, Lululemon announced a recall of some of the store's reusable bags that were distributed since the Vancouver Olympics in February 2010. The specific bags recalled were made in China from polypropylene, a common material used in reusable bags distributed by retailers. The concerns by Lululemon were due to reports that similar bags have been found to contain high levels of lead.[9]

In a statement released on December 10, 2013, Wilson announced his resignation as chairman of Lululemon, and that president of TOMS Shoes, Laurent Potdevin, would become CEO.[10]

In February 2014, Lululemon Athletica announced plans to open its first full store in Europe with a flagship shop in Covent Garden, London.[11]

On August 7, 2014, lululemon athletica inc. and Wilson facilitated Advent's re-enengagement in lululemon by selling 13.85% ownership in the company to Advent for approximately $845 million.[12] The transaction received the full support of the lululemon Board of Directors and changes the board dynamic. Advent Managing Partner David M. Mussafer and Managing Director Steven J. Collins will be appointed to lululemon's Board of Directors, expanding the Board from 10 to 12 members. Mr. Mussafer will now share Chairman responsibilities with Michael Casey. Lululemon will also engage an independent expert to evaluate and make recommendations regarding the lululemon Board's committees, policies and procedures over the course of 90 days following the completion of Advent's stock purchase.[13][14]

On February 2, 2015, Chip Wilson announced that he has resigned from the board.[15] Wilson believed that the company had lost its way and was driven by the wrong values. "I believe that now is the right time to step away from the board," Wilson, 59, said. [16]Michael Casey, lead director of the board, will replace Wilson. [17]

Management practices

Senior management

The senior management at Lululemon consists of a board of directors – chaired by founder and former CEO Dennis "Chip" Wilson, in addition to CEO Christine Day (former President of Starbucks Asia), a Chief Financial Officer, two Executive Vice Presidents, and several Independent Directors.[18] Day announced her departure as CEO in June 2013 after one of the company's core products, black Luon yoga pants, were pulled due to the sheerness and quality of the pants.[19] The current CEO is Laurent Potdevin.[20] Lululemon's senior management consists of non-executive directors, executives who do not serve as directors, and executive officers who also serve as directors. The board of directors believes one of its most important functions is to protect stockholders’ interests via independent oversight of management.[21] The key role for Lululemon's senior management is to continue growing the company by expanding further into the United States.[18]

Store managers

Store managers have responsibility for the store's layout, color coordination, and community involvement. The idea is that they have the opportunity to run their store as if it were their own small business. As opposed to typical retail outlets, Lululemon is highly decentralized. Seventy percent of managers are hired internally, with the intention that employees dedicate themselves to the company and embrace the corporate culture that is instilled in Lululemon.[22]

Educators

Lululemon refers to its retail store employees, of which there are approximately 4500 in Lululemon stores across North America, as “educators.”[18] They are required to develop a 'personal connection' with each customer. As fitness and healthy-lifestyle ambassadors, Lululemon employees must set goals for the next ten years, which are posted in the store.[23] Employees are given certain books that founder Chip Wilson chose as being critical to his own development and required to read every one of them.[23]

Employee management and incentives

After a prolonged hiring process, potential employees are taken to a yoga or spinning class to ensure they "fit in". New employees, regardless of skill and background, are required to work the floor for at least three weeks, where they receive about thirty hours of in-house training.[18][24] Employees who have been on staff for a year are sent to the Landmark Forum, a personal development program.[23] As further incentive, Lululemon has created a new program called "Fund a Goal," which was designed to eventually pay for high-performing employees to achieve one of the goals on their list.[23] All of Lululemon's employees are given opportunities to attend fitness classes at local gyms in the area.

According to the company, Lululemon's management practices revolve around two key theories: the human relations theory and the high commitment work practices theory. The theory of high commitment firms is based on the idea that success rests on getting a committed group of employees working towards a common goal.[25] Furthermore, high commitment firms typically have a strong culture which may not appeal to everybody, so these companies hire slowly to make sure potential employees fit well. A strong emphasis is placed on training new employees and encouraging teamwork.[25] Lululemon also claims to model itself after the human relations theory of management, which states that the effects of social relationships, employee satisfaction and motivation as well as recognition, security, and a strong sense of belonging have a positive impact on morale and productivity.

Manufacturing and subsidiaries

Although Lululemon designs its clothing in Canada, all manufacturing and production is done overseas in countries such as Bangladesh, Vietnam and China where manufacturing costs are much lower. Lululemon ensures that each factory undergoes strict screening and inspection before being selected to manufacture their products.[26] However, seventy percent of Lululemon's clothing is manufactured in developing countries and founder Chip Wilson controversially publicly defends the practice of child forced labor and sweatshops (Deegan).[27]

Lululemon recently opened its first subsidiary, Ivivva Athletica, which is a dance and gymnastics inspired clothing line for young girls ages 6–14. Ivivva is currently run by Lululemon, however Ivivva has opened 15 of its own stores in Canada and currently has 5 showrooms in the United States.[28]

Corporate philosophy and practices

Beginning in late 2011,[29] Lululemon began imprinting "Who Is John Galt?" on its shopping bags, and featured praise to author Ayn Rand and her novel Atlas Shrugged on their website.[30]

Lululemon has its main factory in Vancouver, British Columbia, Canada. In 2004, production expanded outside Canada and currently takes place in factories in the United States, China, Israel, Taiwan, Bangladesh, Vietnam, Thailand, Peru, and Indonesia.

The original intent of Lululemon was to "elevate the world from mediocrity to greatness", and since then the mission has become to "create components for people to live long, healthy, and fun lives". Lululemon Athletica has seven core values that educators employed by the company are expected to articulate and embody. They include: quality, product, integrity, balance, entrepreneurship, greatness, and fun. It also has a manifesto which acts as a "truth check" (inspiration), composed of its own beliefs that staff, employees, and surrounding communities are encouraged to be inspired by daily. The manifesto was created by a third party, Blur Studios in Vancouver in collaboration with local artists. All manifesto artworks in Lululemon retail stores are copyrighted by the artists themselves, not Lululemon Athletica.

Every Lululemon Athletica offers free yoga classes. The company also offers health benefits, and growth opportunities to its employees and customers at store locations.[31]

Notable controversies

Vitasea fabric controversy

In November 2007, The New York Times reported that it had commissioned laboratory tests that failed to find significant differences in mineral levels between cotton T-shirts and the fabric Vitasea, used by Lululemon in some of its clothing lines.[32] Following the publication of the Times article, Lululemon commissioned a rush laboratory test that it claimed confirmed the seaweed content of its Vitasea line.[33] Lululemon was subsequently forced to remove all health claims from its seaweed-based products marketed in Canada, following a demand from the Competition Bureau of Canada.[34]

Product quality issues

In March 2013, Lululemon was hit by a large recall of its black yoga pants that were unintentionally transparent. The recall, which amounted to approximately 17% of all women's pants sold in its stores, is anticipated to cause shortages of this store staple and is anticipated to have a significant impact on its financial results.[35] Lululemon's Chief Product Officer, Sheree Waterson, announced she would be stepping down following the fallout from the recall.[36] The financial hit on earnings, and the reputational damage to the Lululemon brand are credited with the executive's forced departure.[37]

Controversial statements by founder

Founder Chip Wilson has said that he was inspired to name the company "Lululemon" because of Japanese peoples' inability to pronounce the letter "L", and the extra effort they would have to make to pronounce the name would work as a marketing tool in that country. "It's funny to watch them try and say it," he said.[38]

Wilson has also stated that he favors child labor in developing countries,[38] claimed that cigarette smoking and the birth control pill led to high divorce rates and the prominence of breast cancer in the 1990s, and that all these factors led to the founding of Lululemon,[39] and that his company does not make clothes for plus-size women because it costs too much money.[40]

Wilson also blamed excessive pilling in yoga pants on customers themselves, saying "Frankly some women's bodies just don't actually work for it." and "They don't work for some women's bodies...it's really about the rubbing through the thighs, how much pressure is there over a period of time, how much they use it."[41] These comments led to Wilson's resignation as Lululemon's Board Chairman.[42]

Legal disputes

In August 2012, Lululemon filed suit against Calvin Klein, Inc. and supplier G-III Apparel Group for infringement of three Lululemon design patents for yoga pants.[43] The lawsuit was somewhat unusual as it involved a designer seeking to assert Intellectual Property protection in clothing through patent rights. On November 20, 2012, Lululemon filed a notice of voluntary dismissal in the Delaware courts based upon a private settlement agreement reached between the parties that would dismiss the suit.[44] According to a Lululemon press release, "Lululemon values its products and related IP rights and takes the necessary steps to protect its assets when we see attempts to mirror our products.”[45]

2011 murder of Jayna Murray

In November 2011, Lululemon employee Brittany Norwood was convicted of the first-degree murder of a co-worker, Jayna Murray, in the Bethesda, Maryland store where they both worked.[46][47][48] Prosecutors said that in March 2011, Norwood lured Murray back to the store after closing, then attacked her, inflicting over 300 injuries, including head trauma and stab wounds.[47][49] Murray died in the store's back hallway, after which Norwood staged a crime scene to claim that intruders had raped both women and killed Murray.[46][47] The prosecution was barred from introducing evidence that Murray had accused Norwood of shoplifting.[47][50] The defense argued for a conviction of second-degree murder, claiming the attack was not pre-meditated.[46] The case received intense media coverage and was commonly referred to as the "Lululemon murder".[46][47][48][50][51][52] In January 2012, Norwood was sentenced to life imprisonment with no possibility of parole.[53]

References

  1. ↑ 1.0 1.1 1.2 1.3 "Lululemon Athletica Inc. Annual Report Form 10-K". Lululemon Athletica. 2013-03-21. Retrieved 2014-08-27.
  2. ↑ 2.0 2.1 Lululemon (LULU) annual SEC balance sheet filing via Wikinvest
  3. ↑ "Yen for zen; Yoga is to today what aerobics were to the eighties.; But the new gear is a far cry from yesterday's; Jane Fonda sweats.". The Globe and Mail (Toronto). 2011-11-29.
  4. ↑ "Shoppers bare all for free clothing".
  5. ↑ "Lululemon CEO Steps Down". The Daily Beast. Retrieved 11 June 2013.
  6. ↑ "lululemon athletica appoints Laurent Potdevin as chief executive officer". MarketWatch. Retrieved 10 December 2013.
  7. ↑ "Dennis "Chip" Wilson, founder of Lululemon Athletica, presides over the opening bell". Nasdaq. Retrieved 2007-07-29.
  8. ↑ "Innovative Retailer of the Year". Retail Council of Canada. Archived from the original on 2006-04-05. Retrieved 2006-08-15. Link inaccessible as of 2007-09-13.
  9. ↑
  10. ↑ Ogul, David. "Chip Wilson: Lululemon Chairman Resigns; TOMS CEO Taking the Helm". Newsmax. Retrieved 10 December 2013.
  11. ↑ Suzanne Bearne, Drapers. “Lululemon limbers up to open first UK store in Covent Garden.” February 20, 2014. February 4, 2015.
  12. ↑ "lululemon Founder Chip Wilson Votes Against Re-Election of Outside Directors". 7 August 2014.
  13. ↑ http://files.shareholder.com/downloads/LULU/3383971145x0xS1193125-14-300979/1397187/filing.pdf
  14. ↑ "Power shifts at Lululemon as Chip Wilson seals deal". Globe and Mail. 11 June 2014.
  15. ↑ http://www.wsj.com/articles/lululemon-founder-wilson-quits-board-1422887252
  16. ↑ http://www.businessinsider.com/lululemon-founder-chip-wilson-resigns-2015-2
  17. ↑ http://www.huffingtonpost.com/2013/12/10/chip-wilson-leaving-lululemon_n_4416487.html
  18. ↑ 18.0 18.1 18.2 18.3 "Form 10-K". U.S. Securities and Exchange Commission.
  19. ↑ Fred Meier, USA TODAY 7:25 p.m. EDT June 10, 2013 (2013-06-10). "Stunner: Lululemon CEO Christine Day leaving". Usatoday.com. Retrieved 2014-04-13.
  20. ↑ http://investor.lululemon.com/releasedetail.cfm?ReleaseID=812698
  21. ↑ "Form 14A" (PDF). EDGAR Online. Retrieved 2012-10-18.
  22. ↑ "Lululemon CEO: How to build trust inside your company". CNN Money. Retrieved 2012-10-18.
  23. ↑ 23.0 23.1 23.2 23.3 "Lululemon Athletica-Driving a Culture of Individual and Organizational Development, Accountability and Innovation". HRM Today. Retrieved 2012-10-18.
  24. ↑ "Hiring for culture fit at Lululemon Athletica". Canadian HR Reporter.
  25. ↑ 25.0 25.1 "Embracing the Unorthodox: Welcome to the High Commitment Workplace". HRVoice. Retrieved 2012-10-18.
  26. ↑ "Our Factories". Lululemon. Retrieved 2012-10-18.
  27. ↑ "Say No To Lululemon!". Elephant Journal. Retrieved 2012-10-18.
  28. ↑ "Lululemon's Little Sister Tests the Waters in America.". Brandchannel.com. Retrieved 2012-10-18.
  29. ↑ Edwards, Jim (April 24, 2012). "12 Utterly Bizarre Facts About The Rise Of Lululemon, The Cult-Like Yoga Brand". Business Insider. Archived from the original on November 3, 2012. Retrieved November 3, 2012.
  30. ↑ Alexis (2011-11-02). "Blog | who is john galt?". Lululemon.com. Retrieved 2012-09-19.
  31. ↑ "lululemon athletica Assets Explode 69.78% Higher in the Last Year – Yoga Athletic Apparel Catches on Globally". Quarterly Retail Review. March 6, 2011.
  32. ↑ Story, Louise (2007-11-14). "Seaweed Clothing Has None, Tests Show". New York Times. Retrieved 2007-11-14.
  33. ↑ "Lululemon athletica Confirms VitaSea Fabric Contents and Testing Process". Lululemon athletica Corporation. Archived from the original on 2007-12-22. Retrieved 2007-11-17.
  34. ↑ "Lululemon VitaSea Clothing: Competition Bureau Takes Action to Ensure Unsubstantiated Claims Removed from Lululemon Clothing". Government of Canada. Retrieved 2007-11-16.
  35. ↑ Isidore, Chris (March 19, 2013). "See-through pants problem causes Lululemon recall". CNN Money. Retrieved April 7, 2013.
  36. ↑ Kavilanz, Parija (2013-04-04). "Lululemon exec out after yoga pants fiasco". CNN Money. Retrieved April 4, 2013.
  37. ↑ "Lessons Learned from the Lululemon Recall". The National Law Review. Risk and Insurance Management Society, Inc. (RIMS). Retrieved April 10, 2013.
  38. ↑ 38.0 38.1 "The Tyee – Yoga Mogul Has Critics in a Knot". Thetyee.ca. 2005-02-17. Retrieved 2014-04-13.
  39. ↑ "blog| how lululemon came into being - blog| lululemon athletica". Lululemon.com. 2009-03-30. Retrieved 2014-04-13.
  40. ↑ Bhasin, Kim (2013-07-31). "Shunning Plus-Size Shoppers Is Key To Lululemon's Strategy, Insiders Say". Huffingtonpost.com. Retrieved 2014-04-13.
  41. ↑ "Outrageous Remarks By Lululemon Founder Chip Wilson". Business Insider. 2013-12-10. Retrieved 2014-04-13.
  42. ↑ Eun Kyung Kim (2013-12-10). "Lululemon co-founder steps down in wake of 'women's bodies' remark". TODAY.com. Retrieved 2014-04-13.
  43. ↑ Weller, Susan Neuberger; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (September 21, 2012). "S. 3523: Louboutin, Lululemon, and Fashion Design: Finally Getting Some Respect?". The National Law Review. Retrieved January 15, 2013.
  44. ↑ Weller, Susan Neuberger; Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (November 27, 2012). "Lululemon and Calvin Klein Settle Yoga Pants Design Litigation". The National Law Review. Retrieved January 14, 2013.
  45. ↑ "lululemon athletica canada inc., calvin klein, inc. and g-iii apparel group, ltd. reached a settlement agreement in design patent litigation". November 20, 2012.
  46. ↑ 46.0 46.1 46.2 46.3 Morse, Dan; Zapana, Victor (2011-11-02). "Brittany Norwood convicted of killing Lululemon co-worker Jayna Murray". The Washington Post. Retrieved 2012-09-19.
  47. ↑ 47.0 47.1 47.2 47.3 47.4 Noble, Andrea (2011-11-02). "Guilty verdict in Lululemon murder case". The Washington Times. Retrieved 2012-09-19.
  48. ↑ 48.0 48.1 Martinez, Edecio (2011-11-03). "Brittany Norwood found guilty of first degree murder in Lululemon trial". CBS News. Retrieved 2012-09-19.
  49. ↑ Rosenwald, Michael S. (2011-11-02). "Inside the courtroom: The words hanging over the Lululemon trial". The Washington Post. Retrieved 2012-09-19.
  50. ↑ 50.0 50.1 "Second Week of Testimony in Lululemon Murder Trial". NBC Washington. 2011-10-31. Retrieved 2012-09-19.
  51. ↑ Noble, Andrea (2011-10-24). "Selection of jury starts in Rockville". The Washington Times. Retrieved 2012-09-19.
  52. ↑ Morse, Dan (2011-10-23). "Lululemon killing trial begins Monday". The Washington Post. Retrieved 2012-09-19.
  53. ↑ Morse, Dan (March 12, 2012). "Lululemon marks anniversary of Jayna Murray's death". The Washington Post. Archived from the original on November 3, 2012. Retrieved November 3, 2012.

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