Skip to main content

LuluLemon_ 'Hermes' in Yoga

· 5 min read

1. What happend in the history of LuluLemon?

In 1988, Chip Wilson founded Lululemon in Vancouver, including a small design studio, retail store and yoga studio. Lululemon's products were refined to serve the "vertical segment of women's yoga wear market" and officially became a yoga-inspired sportswear brand. Lululemon rose rapidly with its accurate crowd positioning, product innovation, DTC's direct marketing model and high-quality community activities, thus won the favor of many middle-class women.

Then Lululemon was officially listed in 2007 and enjoyed rapid growth from 2010 to 2012. However, since 2013, Lululemon's revenue growth has slowed down significantly due to product quality problems, declining innovation and SKU expansion speed. Profitability has also begun to decline; Since 2018, Lululemon has started to carry out product innovation and expand its SKUs to expand new user base. Meanwhile, the development of e-commerce and digitalization has led to the rapid development of its online DTC. Meanwhile, the new store model has significantly increased Lululemon's number of users and product sales, and the number of stores has also continued to grow. The company has rapidly improved its competitiveness in the direct selling market, with significant increases in profitability, revenue and stock price. In Lululemon's next five-year strategy, Lululemon plans to double Men's and Digital sales, and quadruple its international sales. That is, continue to develop men's SKU to expand market segments. Expanding online channels to increase online DTC sales. And increasing the number of international stores and holding marketing activities, spread the concept and experience of hot sweat life. So that achieve their own growth in the future.

2. How does LuluLemon make Money?

LuluLemon sells its products through online direct sales (DTC) and stores, and its main revenue sources are product sales:

  • Online DTC Revenue = Average price of Products * Total sales
  • Offline store revenue = Average sales per store Number of stores_ _ Average price of Products


3. How changes in key indicators affect stock prices?

The market pays more attention to a company's profitability indicator, that is, the Sales * Price of its products; Therefore, the factors that affect LuluLemon's income level and thus its stock price are as follows:

  • Average price of products
  • Online DTC sales
  • Number of stores
  • Average sales per store

Observable indicators influencing the above factors include:

  • Number of offline Store

Direct-sale stores are Lululemon's most important sales channel besides online DTC. After testing the cost and customer flow level by setting up store models such as exhibition hall, Lululemon opens direct-sale stores under the condition of controllable cost. Users can participate in community activities and experience products in stores, improve the effect of community marketing and deepen brand influence. This increasing sales and frequency of purchases, driving revenue and stock price.

  • SKU number

The number of SKUs is one of the core indicators of consumer goods companies. Lululemon, as a company whose main business is clothing sales, is not a exception. The increase in the number of SKUs means Lululemon continues to expand market segments, expand usage scenarios and improve the frequency of users' purchase. From women's yoga suits to men's sports, running, cycling, sports accessories and other products, Lululemond products broaden the user market, so that the purchase of products is no longer limited to yoga enthusiasts; Therefore, the number of SKUs increases, the company's development of new market segments is more effective than expected, the number of customers increases significantly, then the CAC decreases, the re-purchase rate increases, the growth of net operating income accelerates, and the stock price rises

  • E-commerce development

Online DTC direct sales is currently Lululemon's most important sales channel. Lululemon's business was maintained even when stores were closed during the Covid-19. Online sales not only achieve less operating and staff costs, but also expand the reachable customer base and promote sales growth. The development of e-commerce (online shopping awareness and logistics infrastructure) is the cornerstone of the vigorous development of online DTC, with the improvement of e-commerce, Lululemon store online DTC sales are expected to grow rapidly and thus driving up share prices.

  • Internationalization

By the end of Q1 in 2022, Lululemon had 574 stores in 17 countries around the world. The development of globalization enables Lululemon's products to expand sales groups in more countries, thus promoting the growth of sales and purchase frequency, and thus promoting the rise of stock price

  • Marketing activities

Lululemon often carries out community events in and out of the store. Community events invite brand ambassadors to share, but they are not limited to brand ambassadors. Lululemon also holds a variety of large-scale outdoor activities on a regular basis, and the activities are not limited to yoga, like The Sweatlife Festival; These marketing activities are not for the purpose of saling goods, but to promote sports and hot sweat life concept to the public, cultivate users' awareness of sports and brand influence, so as to improve user loyalty, user number and sales in the long term, and promote the rise of income and stock price

Contact us