||This article may contain promotional material and other spam. (June 2012)|
|Traded as||NASDAQ: LULU|
|Number of locations||201 (October 2012)|
|Area served||Canada, United States, Australia and New Zealand|
|Key people||Christine Day (CEO)|
|Products||Athletic Apparel and Accessories|
|Revenue||US$1 Billion (FY 2012)|
|Operating income||US$286.9 Million (FY 2012)|
|Net income||US$184 Million (FY 2012)|
|Total assets||US$734.6 Million (FY 2012)|
|Total equity||US$606.1 Million (FY 2012)|
Lululemon Athletica Inc. //, 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.
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, 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.
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.
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, and she is expected to be replaced by Laurent Potdevin in January 2014.
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.
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.
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. 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. The company is currently searching for a replacement. 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. The key role for Lululemon's senior management is to continue growing the company by expanding further into the United States.
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.
Lululemon refers to its retail store employees, of which there are approximately 4500 in Lululemon stores across North America, as “educators.” 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. 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.
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. Employees who have been on staff for a year are sent to the Landmark Forum, a personal development program. 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. 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. 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. 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. 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).
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.
Corporate philosophy and practices
Lululemon has its main factory in Vancouver, British Columbia, Canada. In 2004, production expanded outside Canada and currently[update] 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.
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. Following the publication of the Times article, Lululemon commissioned a rush laboratory test that it claimed confirmed the seaweed content of its Vitasea line. 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.
Notable legal controversies
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. 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. 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.”
In March 2013, Lululemon was hit by a large recall of its black yoga pants that were unintentionally see-through. 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. Lululemon's Chief Product Officer, Sheree Waterson, announced she would be stepping down following the fallout from the recall. The financial hit on earnings, and the reputational damage to the Lululemon brand are credited with the executive's forced departure.
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