Lululemon Athletica: Workout in Style
I am keenly interested in businesses across the globe. I have covered a few interesting businesses the past. Here is one more.
lululemon athletica inc. is principally a designer, distributor, and retailer of healthy lifestyle-inspired athletic apparel and accessories. It started out as a yoga pants seller and branched out into sportswear, casual wear and accessories.
Lululemon is in the clothing industry catering to trend followers by building a brand image of a smart retailer. The company has built a solid online customer base and tries capturing the users who would be interested in infusing lifestyle, fashion and fitness together.
INDUSTRY DETAILS
U.S. textile and apparel shipments totalled $64.4 billion in 2020.
The U.S. industry is the second largest exporter of textile-related products in the world. Fibre, textile, and apparel exports combined were $25.4 billion in 2020.
Lululemon is also inclined heavily toward the fitness industry
The number of athletic wear styles at plus-size retailers has doubled from last year, indicating a separate growing customer base.
Yoga clothing grew by 144% compared to 26% last year. The yoga niche is opening up new opportunities and all the big brands like Nike and Adidas is trying to venture into the niche.
The athletic industry customer base is nearly 60% women and 40
% men.After a survey it was found out that 44% of the customers would still like the apparel from stores, this is interesting considering the impact on online shopping in other clothing lines.
INDUSTRY OPPORTUNITIES
The U.S. market for athleticwear is expected to grow to 69.2 billion in 2022
The global athletic market is expected to be valued at $580 Billion by 2025.
With more and more people wanting to be health conscious, demand for gyms, guides, gym wear and related products is rising.
The introduction of new technology, maintaining affordable prices and opting for subscription business models will create value for investors in long run.
The demand for “recycled” athletic wear is rising rapidly. Consumers are starting to prefer environmentally friendly products. Major companies like Nike have capitalised on it and are producing shoes made out of recycled plastic.
The demand for yoga wear in men is expected to rise. Established brands have only focused on women in this segment which could change very soon
38% of the customers look for “breathable” fabric.
Athletic wear is now preferred not just by athletes. Infusing it with normal wear is something companies are focusing on. It is also demanded across all age groups.
PRODUCT DETAILS
The apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle including athletic activities such as yoga, running, training, and most other sweaty pursuits.
On the Move and fitness-related accessories
Has a wide range of products stretching from activewear to casual-influenced activewear, an opportunity which was identified at the industry level. Thus the company is strong in identifying and capitalising on segments.
Adapting casual wear into sportswear.
MIRROR, is an in-home fitness company with an interactive workout platform that features live and on-demand classes.
The platform has workout video guides and issues that are widely preferred in reason days
It already possesses cutting-edge technology and has responsive sensors which record the workout details and provide reports to the users.
Other Interesting Points
LULU is a best-in-class retailer with strong top and bottom-line growth with a long runway ahead as they expand internationally
LULU’s margins are faring better than other apparel retailers as macroeconomic indicators weaken because of their proven pricing power and target consumer indicating monopoly and steady revenue.
Risks faced by the company include competition, further deterioration of the global supply chain, and other macro factors, such as unemployment and consumer confidence.
LULU conducts business through two main channels: company-operated stores, and direct-to-consumer (e-commerce). At the end of 2021, LULU operated 574 stores in 17 countries across the globe. The “Other” segment comprises of Outlets and warehouse sales, Temporary locations, MIRROR, Wholesale and License and supply arrangements.
Mirror is new age technology which helps you work out from the home, accessibility and comfort are provided at your doorstep, it poses excellent opportunities if it is bought well by the public.
The brand is little-known outside of North America. Brand awareness in China and major European countries is very low although it is picking up in places such as Singapore.
Lululemon’s online sales increased to $2.8 billion in 2021 from less than $100 million in 2010
The company lacks scale or cost advantage as its production and distribution systems are like those of most apparel companies.
Lululemon does not own any production facilities. Rather, its products are sourced from about 41 manufacturers and 65 fabric suppliers, nearly all of which are in Asia and supply its competitors as well.
The company is in direct competition with wholesalers and direct sellers of athletic apparel, such as Nike, Adidas, Under Armour and Columbia Sportswear Company. They also compete with retailers who have expanded to include women's athletic apparel including The Gap, Inc. (including the Athleta brand), Victoria's Secret with its sport and lounge offering, and Urban Outfitters, Inc.