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Queen of Athleisure Wear

“Our purpose is to elevate human potential by helping people feel their best.”

– Chip Wilson, Founder of lululemon

arvy’s teaser: lululemon, the queen of athleisure wear, has redefined yoga wear with premium quality and lifestyle branding. Due to increasing competition in its home turf, the company is planning further growth with a focus on product innovation, e-commerce and international expansion.

Athleisure wear.

The fashionable trend of wearing sportswear in leisure time or in the office away from sport.

The term is made up of the words “athletic” and “leisure wear”. Athleisure outfits can include tracksuits, sports jackets, hoodies, yoga pants, sneakers, Birkenstocks, Uggs, leggings and shorts that look like sportswear and can be easily combined together.

As with many trends, it all started in the US in the mid-2000s with the increasing popularity of yoga pants, which were described as “fashionable, dressed-up sweats and exercise clothing”. The convenience of wearing clothes that matched and could be paired with yoga pants gave mainstream North American women the opportunity to flaunt their casual fashion sense on various occasions without having to change frequently in their everyday lives.

In this rapidly growing trend, there was a figurehead that made yoga pants socially acceptable.

The queen of athleisure wear.


Chart 1: lululemon keeps stretching its revenue every single year

Source: chartr, lululemon

Immense popularity fuels brand strength

lululemon athletica was founded in Canada in 1998 by Chip Wilson.

As one of the few men practicing yoga at the time, he had an idea: “to produce yoga pants with the purpose to elevate human potential by helping people feel their best”.


The company is often credited with pioneering the athleisure apparel trend and has become one of the largest activewear companies in the US and Canada (chart 1).

In case you are wondering… The name “lululemon” has no meaning. The founder simply wanted a name with lots of “L”s in it so that it would sound Western to Japanese buyers (the biggest market for his previous company). Japanese people have difficulty pronouncing the letter “L” as it is not in their vocabulary, so they think it will be a big brand from the US.

As for the logo, it is all about the Greek letter omega (Ω).

An omega is a symbol of accomplishment and mastery in Greek culture. It is a perfect symbol for a brand that encourages people to achieve their health goals and maintain a balanced lifestyle.

But how did the brand achieve such popularity that the name lululemon has literally become synonymous with yoga and yoga pants?

By selling high-quality clothing at premium prices and with the best fabrics.

And by turning athleisure into a lifestyle.

A powerful combination.

Chart 2: The only lululemon store in Switzerland, Marktgasse 12, Niederdorf, Zurich

Source: David Bieder / lululemo

Perfected Business Model

I can warmly recommend that you visit the only lululemon store in Switzerland in Niederdörfli (chart 2). You can immediately feel the atmosphere – they only speak English to you – and you will be amazed at how many people are willing to pay 100 to 150 CHF for yoga pants.

In addition to creating a lifestyle, lululemon has always been at the forefront of activewear research and development.

By combining these two aspects, they have perfected their business model and use their brand strength to limit themselves to three revenue streams. This gives them an advantage over companies like Nike, Adidas, On Holding (which is now also active in athleisure, including yoga pants), Under Armour or the up-and-coming private companies like Alo Yoga.

The yoga manufacturer only sells through 1) its own stores, 2) online and 3) events and brand ambassadors, which gives it significant control over its sales process (chart 3). This model allows it to monitor prices, discounts, expenses, product assortment and marketing. This helps lululemon to maintain its status as a premium brand.

The result?

The highest profitability! 2.5x as high as On Holding, for example.

Best-in-class gross and net margins, which are even expanding as online sales (higher margins due to lower staff costs and store costs such as rent) soon take over store revenues.

But as always, when there is a lot of money to be made, competition is waiting around the corner.

To counter this, lululemon has drawn up a five-year plan.

Chart 3: Revenue split between stores, online and other channels

Source: Finchat, CompoundingQuality

In Every Crisis Lies Opportunity

You will agree with me that lululemon is a bloody “Good Story”. This has not gone unnoticed, and competition in the main US market, where the company generates 79% of its sales, is intensifying.

A small crisis has unfolded at the queen of athleisure wear.

For this reason, they defined a five-year plan and focused on three priorities: Product innovation, e-commerce and international expansion.

Product innovation such as athletic footwear and additions to the men’s assortment, which only accounts for 23% of sales, e-commerce to improve profitability and international expansion towards Europe and China in particular. There are plenty of growth opportunities there in a huge market where you can build on your strong brand and the trend towards a healthy lifestyle.

Today, lululemon is trading at its lowest free cash flow valuation since going public in 2007. Uncertainty has increased as the company now must leave its highly competitive home turf and expand into new waters to meet high growth expectations.

This is reflected in the increasing volatility of the share price in recent quarters – a choppy “Good Chart”.

But speaking of China: the word crisis (危機) consists of two characters in Chinese.

One stands for danger, the other for opportunity.

You see, in every crisis lies opportunity.

Chart 4: lululemon since IPO

Source: TradingView

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