Lululemon Athletica: The Athleisure Leader - [Business Breakdowns, EP.120]

This is Zack Fuss, an investor at Irenic Capital, and today we’re breaking down Lululemon Athletica. The Canadian company, founded by Chip Wilson in 1998, has grown from a pop-up store in a yoga class to a $45 billion apparel business. Along the way, it pioneered the trend of athleisure and forever changed what women and men wear to work out in. To break down the business, I am joined by John Zolidis, president and founder of Quo Vadis Capital. We explore the origins of Lululemon’s direct to consumer growth strategy, how it has remained relevant in an industry known for fleeting success, and how its business model compares to apparel giants like Nike. Please enjoy this business breakdown of Lululemon. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- This episode is brought to you by Tegus. Tegus is the modern research platform for leading investors, and provider of Canalyst. Tired of calculating fully-diluted shares outstanding? Access every publicly-reported datapoint and industry-specific KPI through their database of over 4,000 driveable global models handbuilt by a team of sector-focused analysts, 35+ industry comp sheets, and Excel add-ins that let you use their industry-leading data in your own spreadsheets. Tegus’ models automatically update each quarter, including hard to calculate KPIs like stock-based compensation and organic growth rates, empowering investors to bypass the friction of sourcing, building and updating models. Make efficiency your competitive advantage and take back your time today. As a listener, you can trial Canalyst by Tegus for free by visiting tegus.co/patrick. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt | @domcooke Show Notes (00:02:30) - (First question) - An overview of Lululemon (00:03:27) - Lululemon's success lies in branding, innovation, and community involvement (00:05:53) - Evaluating their growth story and investment potential (00:09:57) - Chip Wilson’s history and influence (00:16:53) - Management transitions, operational issues, and turnaround under new leadership (00:20:01) - Lululemon's success lies in its functional product and strong brand message (00:23:13) - Fending off competition through unique branding and customer engagement (00:26:31) - Lulu aims to grow men's business to complement women's dominance and reach (00:28:46) - China offers significant growth potential for Lululemon (00:32:35) - Focusing on vertical integration and limited wholesale channels (00:34:21) - Lulu's higher gross margins stem from product mix and DTC focus (00:37:08) - Increased capital expenditure is primarily allocated to store openings (00:40:18) - Mirror acquisition didn't meet expectations, unlikely to repeat such deals (00:42:30) - Significant risks for Lululemon's future (00:44:48) - Lessons learned from studying Lululemon