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.
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
