strategic review of lululemon athletica

lululemon athletica

Agenda

• About lululemon• Situational overview• Lululemon’s current mission and vision• Company mantra• Customer profiles• Customer needs• Vision reviewed• The lululemon value proposition• Company challenges• Critical Success Factors• Key Results Indicators• Key Performance Indicators

About lululemon

• Founded in 1998• Determined the create more

appropriate yoga apparel• Started as combined yoga studio

and clothing store• Shifted to apparel store with staff as

yoga educators• 2011 sales of $710M• 133 Stores in the US, Canada and

Australia

From a hobby to an athletic-apparel powerhouse

Situational Overview

• Lululemon has been experiencing growing pains

• Professional management has taken over from the founder

• Due to demand the company has lost profit due to back-orders

• A reevaluation of the company’s vision is required

• The company’s current strategies have been developed despite a poorly articulated vision but hold merit

Our observations as management consultants

lululemon’s current Mission and Vision

Mission“Creating components for people to live

longer, healthier, more fun lives.”

Vision“Elevating the world from mediocrity to

greatness.”

lululemon’s values

Who are lululemon’s core customers?

Officially Stated Target Market:

• 32 year old woman (18-65 range)• Sophisticated• Educated• Active Lifestyle• Balances Career and Family

The actual lululemon customer

Women• 18-65 years• Original Target +• Street wear inclined• “Badonkadonk” Improvement• Middle-Class to Affluent• Fashion Conscious• Young Urban Professionals• Tweens & Teens

Men• 18-45 years old• Legitimate Athletes / Yogis• Street Wear

M(ASS) APPEAL! (so to speak)

What do lululemon customers need?

Yoga-Inspired Athletic Apparel

Function

Quality

Fashion

Availability

Education

Customers need “Function”

• Appropriate for sports• Compression garments• Moisture-wicking• Remains in place in Yoga poses

Customers need “Quality”

• Durable product• Will resist strenuous use• Low-maintenance

Customers need “Fashion”

• Fashion-forward garment• Aura of athleticism• Improves body appearance

Customers need “Availability”

• Should have stock available• Sufficient colors and sizes• Avoid turning away customers

Customers need “Education”

• Model driven by Yoga enthusiasts• Word of mouth promotion• Why spend $100+ on sweats?• Benefits of athletic wear

Updating lululemon’s Mission and Vision

Mission“Creating components for people to live

longer, healthier, more fun lives.”

Vision“Elevating the world from mediocrity to

greatness.”

Mission“Creating components for people to live

longer, healthier, more fun lives.”

Vision“To become the number one women’s

athletic apparel brand”

Current lululemon challenges

• Unable to meet sales demand • Hasty expansion to new locations

with insufficient research• Profit-margin erosion due to

supply pressure• Word-of-mouth promotion

restricts speed of growth

The value proposition

Product Leadership

Reinforced by Mission:“Creating components for people to live longer, healthier, more fun lives.”

Finding Critical Success Factors

Strengths- Innovative Product- Cult-Like Brand Loyalty- High profit margins

Weaknesses- Brand recognition restricted- Sourcing cost pressures- Distribution challenges

Opportunities- Untapped Markets- New Sports Focii- Street wear

Threats- Strong Rivals- Can be imitated- Small, Faddish Market

SWOT

lululemon’s strategic initiatives

• Improve same-store sales• Add 20-25 new high-productivity stores• Evolve ecommerce channel to hybrid model

Sales Growth

• Invest in Human Resource Information Systems• Implementation of Business Intelligence Systems• Vendor/Manufacturing Management Systems

OperationalImprovement

• Manage Sourcing Cost PressureCost Containment

• Hot Yoga Product Line / Yoga Accessories• Running Line• Bras and Tops

Product Innovation

Proposed Key Result Indicators

Number of Stores Opened (Growth in Sq Ft)

Employee Satisfaction Survey

Aggregate $ per Sq Ft

Brand Awareness – Multi-Dimensional Customer Survey

Gross Margins

SG&A as a % of Sales

Sales (annual, quarterly, monthly, same store sales)

Operating Margin

Return on Invested Capital

Proposed Key Performance Indicators

Sales Growth

Sales/ Sq Ft

$ / Purchase

Items / Purchase

Yield / Foot traffic

eCommerece % of Sales

Operational Improvement

Sell Through %

Safety Stock

% of inventory available

Forecast Accuracy

Distribution Lead Time

Cost Containment

Mfg Schedule Adherence

On-Time Delivery %

Defect Rate %

Cost / Quoted Cost

Tendered Q$ / Preferred Q$

Product Innovation

New Product / Store Inventory %

Time to Market (days)

R&D $ / Sales

%FTE for Innovation

Products / Concepts %

Conclusion

• Maturing Company• Evolve to Professionally Managed• From healthy lifestyle to healthy

business practices• Alignment is simple but highly

effective and relatable• Happy healthy customers lead to

happy healthy financials• Reinforce what makes us

successful• Measurable goals

Aligning Mission, Vision, Strategies and Indicators