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Lululemon

Lululemon Athletica Inc.
Public
Traded as LULU
Industry Athletic Clothing
Founded 1998
Founder(s) Chip Wilson
Headquarters Vancouver, BC
Number of locations 201 (October 2012)[1]
Area served Canada, United States, Australia and New Zealand
Key people Christine Day (CEO)
Products Athletic Apparel and Accessories
Revenue Increase US$1 Billion (FY 2012)[2]
Operating income Increase US$286.9 Million (FY 2012)[2]
Net income Increase US$184 Million (FY 2012)[2]
Total assets Increase US$734.6 Million (FY 2012)[3]
Total equity Increase US$606.1 Million (FY 2012)[3]
Employees 2861
Divisions Lululemon Athletica
OQOQO
Ivivva Athletica
Website www. lululemon.com

Lululemon Athletica Inc. /ˌllˈlɛmən/, styled as lululemon athletica, is a self-described yoga-inspired athletic apparel company, which produces a clothing line and runs international clothing stores from its company base in Vancouver, British Columbia, Canada.

Company history

Dennis "Chip" Wilson founded Lululemon Athletica (usually referred to simply as "lululemon" or "lulu") in 1998 in response to increased female participation in sports and in accordance with his belief in yoga as the optimal way to maintain athletic excellence into an advanced age.

Wilson opened the first Lululemon store in Kitsilano, a Vancouver neighbourhood. It included a design studio, a retail store, and shared space with a yoga studio. Lululemon operates approximately 201 stores, with the majority in North America. Lululemon also operates stores in Australia and New Zealand. There are also showrooms in Hong Kong and Great Britain. In addition, Lululemon is sold at fitness studios including Physique 57, CorePower Yoga, Pure Barre and more.

On August 11, 2001 , Fashion Active Lab (FAL), a line with its roots in New York, became available at TNT in Toronto, and the Vancouver store Lululemon Athletica, which specialized in yoga wear.[4]

On October 28, 2002 , when opening a new store, the company organized "naked passes" competition guaranteeing participants a chance to bare all for free yoga wear.[5]

The OQOQO brand was melded into the main Lululemon product line in fall 2009 when the company launched Ivivva Athletica, a new subsidiary targeting girls from ages 6 to 12. Ivivva Athletica was announced by Lululemon in September 2009. Ivivva started with the opening of three stores in December 2009. As of October 2012, Ivivva has 14 locations – mostly located in Lululemon's principal markets in Canada and the United States.

In 2005, Advent International (partnered with Highland Capital Partners), a U.S. private equity firm, bought a 48% minority interest in Lululemon for a reported C$225 million, and former Reebok chief executive officer Robert Meers became the new Lululemon CEO. Wilson, the founder, now has 42% ownership, with retail staff owning 10% in stocks and shares. The company formed a partnership with Descente to oversee Lululemon's Japanese operations; however, in mid-2008, Lululemon closed its Japanese operations (three stores) to focus on the North American market. As of December 2010, Christine Day, a former Co-President of Starbucks International, is the chief executive officer of Lululemon. On June 10, 2013, it was announced Day would leave her position as soon as a successor was found.[6]

Lululemon Athletica announced an initial public offering in May 2007 and became a public company on July 27, 2007. Chip Wilson rang the opening bell on the NASDAQ exchange in the United States that day.[7]

The Retail Council of Canada recognized the company as the 2003 Innovative Retailer of the Year in its "small store" classification.[8]

In December 2010, Lululemon announced a recall of some of the store's reusable bags that were distributed since the Vancouver Olympics in February 2010. The specific bags recalled were made in China from polypropylene, a common material used in reusable bags distributed by retailers. The concerns by Lululemon were due to reports that similar bags have been found to contain high levels of lead.[9]

Panorama from Lululemon Athletica, Westport, CT, taken in 2013.

Management practices


The management practices at Lululemon Athletica incorporate numerous different management strategies. Managers and employees must fit a certain profile. This entails living a healthy lifestyle and being a strong team player.[10] Lululemon Athletica is managed in two key ways: both as a high commitment firm and as a firm that adheres to human relations theory.

Senior management

The senior management at Lululemon consists of a board of directors – chaired by founder and former CEO Dennis "Chip" Wilson, in addition to CEO Christine Day (former President of Starbucks Asia), a Chief Financial Officer, two Executive Vice Presidents, and several Independent Directors.[11] Day announced her departure as CEO in June 2013 after one of the company's core products, black Luon yoga pants, were pulled due to the sheerness and quality of the pants.[12] The company is currently searching for a replacement. Lululemon's senior management consists of non-executive directors, executives who do not serve as directors, and executive officers who also serve as directors. The board of directors believes one of its most important functions is to protect stockholders’ interests via independent oversight of management.[13] The key role for Lululemon's senior management is to continue growing the company by expanding further into the United States.[11]

Store managers

Store managers make their own decisions regarding their individual store. A store manager has the responsibility of deciding the store's layout, color coordination, and community involvement. The idea is that store managers have the opportunity to run their store as if it were their own small business. As opposed to typical retail outlets, Lululemon is highly decentralized. Seventy percent of managers are internal hires, allowing employees to dedicate themselves to the company and to embrace the corporate culture that is instilled in Lululemon.[14]

Educators

Lululemon refers to its retail store employees as “educators.”[11] These educators, of which there are approximately 4500 in Lululemon stores across North America, are required to develop a personal connection with each customer. As fitness and healthy-lifestyle ambassadors, Lululemon's educators must set goals for the next ten years, and their goals are posted in the store.[15] Educators are given certain books that founder Chip Wilson chose as being critical to his own development. Each employee is required to read every one of the listed books.[15]

Employee management and incentives

After a long and slow hiring process, potential employees are taken to a yoga or spinning class to ensure they "fit in". New employees, regardless of skill and background, are required to work the floor as educators for at least three weeks, where they receive about thirty hours of in-house training.[10][11] Lululemon's educators are paid hourly wages while all managers, from store managers to senior management, are salary based. There are incentives in place to encourage members of the Lululemon family to stay with the company. For example, when an employee has been on staff for a year, the company sends them to the Landmark Forum, a personal development program not related to business, aimed as being a gift to the employee, although some employees may not look at it that way.[15] As further incentive, Lululemon has created a new program called "Fund a Goal," which was designed to eventually pay for high-performing employees to achieve one of the goals on their list.[15] Educators are directly supervised by their store manager as there are only a small number of educators working at a given time and store managers are usually former educators with sufficient floor experience. All of Lululemon's employees are given opportunities to attend fitness classes at local gyms in the area.

Lululemon's management practices revolve around two key theories: the human relations theory and the high commitment work practices theory. Lululemon endorses all the practices of a high commitment firm. The theory of high commitment firms supports that their success rests on getting a committed group of employees working towards a common goal.[16] Furthermore, high commitment firms typically have a strong culture, which may not appeal to everybody, so these companies hire slowly to make sure potential employees fit well. A strong emphasis is placed on training new employees and encouraging teamwork among them.[16] On the other hand, Lululemon also models itself after the human relations theory of management. The human relations theory states that the effects of social relationships, employee satisfaction and motivation, have an impact on productivity. Additionally, the human relations theory postulates that recognition, security, and a strong sense of belonging have a large effect on morale and productivity. Lululemon's management practices adhere to both the human relations theory and the theory of high commitment work practices by having small teams of educators all endorsing the same culture and lifestyle, and by the company providing incentives to motivate these employees.

Manufacturing and subsidiaries

Although Lululemon designs its clothing in Canada, all manufacturing and production is done overseas in international factories. Lululemon ensures that each factory undergoes strict screening and inspection before being selected to manufacture their products.[17] However, seventy percent of Lululemon's clothing is manufactured in developing countries and founder Chip Wilson controversially publicly defends the practice of child forced labor and sweatshops (Deegan).[18]

Lululemon recently opened its first subsidiary, Ivivva Athletica, which is a dance and gymnastics inspired clothing line for young girls ages 6–14. Ivivva is currently run by Lululemon, however Ivivva has opened 15 of its own stores in Canada and currently has 5 showrooms in the United States.[19]

Corporate philosophy and practices


Beginning in late 2011,[20] Lululemon began imprinting "Who Is John Galt?" on its shopping bags, and featured praise to author Ayn Rand and her novel Atlas Shrugged on their website.[21]

Lululemon has its main factory in Vancouver, British Columbia, Canada. In 2004, production expanded outside Canada and currently takes place in factories in the United States, China, Israel, Taiwan, India, Thailand, Peru, and Indonesia.

The original intent of lululemon was to "elevate the world from mediocrity to greatness", and since then the mission has become to "create components for people to live long, healthy, and fun lives". Lululemon Athletica has seven core values that educators employed by the company are expected to articulate and embody. They include: quality, product, integrity, balance, entrepreneurship, greatness, and fun. It also has a manifesto which acts as a "truth check" (inspiration), composed of its own beliefs that staff, employees, and surrounding communities are encouraged to be inspired by daily. The manifesto was created by a third party, Blur Studios in Vancouver in collaboration with local artists. All manifesto artworks in Lululemon retail stores are copyrighted by the artists themselves, not Lululemon Athletica.

Every Lululemon Athletica offers free yoga classes. The company also offers health benefits, and growth opportunities to its employees and customers at store locations.[22] The company also pays for management staff and other employees who have worked for the company for over a year to attend the Landmark Forum, a personal development course.

Vitasea fabric controversy

In November 2007, The New York Times reported that it had commissioned laboratory tests that failed to find significant differences in mineral levels between cotton T-shirts and the fabric Vitasea, used by Lululemon in some of its clothing lines.[23] Following the publication of the Times article, Lululemon commissioned a rush laboratory test that it claimed confirmed the seaweed content of its Vitasea line.[24] Lululemon was subsequently forced to remove all health claims from its seaweed-based products marketed in Canada, following a demand from the Competition Bureau of Canada.[25]

2011 murder of Jayna Murray

In November 2011, Lululemon employee Brittany Norwood was convicted of the first-degree murder of a co-worker, Jayna Murray, in the Bethesda, Maryland, store where both worked.[26][27][28] Prosecutors said that in March 2011, Norwood lured Murray back to the store after closing, then attacked her, inflicting over 300 injuries, including head trauma and stab wounds.[27][29] Murray died in the store's back hallway, after which Norwood staged a crime scene to claim that intruders had raped both women and killed Murray.[26][27] The prosecution was barred from introducing evidence that Murray had accused Norwood of shoplifting.[27][30] The defense argued for a conviction of second-degree murder, claiming the attack was not pre-meditated.[26] The case received intense media coverage and was commonly referred to as the "Lululemon murder".[26][27][28][30][31][32] In January 2012, Norwood was sentenced to life in prison with no possibility of parole.[33]

Notable legal controversies

In August 2012, Lululemon filed suit against Calvin Klein,Inc. and supplier G-III Apparel Group for infringement of three Lululemon design patents for yoga pants.[34] The lawsuit was somewhat unusual as it involved a designer seeking to assert Intellectual Property protection in clothing through patent rights. On November 20, 2012, Lululemon filed a notice of voluntary dismissal in the Delaware courts based upon a private settlement agreement reached between the parties that would dismiss the suit.[35] According to a Lululemon press release, "Lululemon values its products and related IP rights and takes the necessary steps to protect its assets when we see attempts to mirror our products.”[36]

In March 2013, Lululemon was hit by a large recall of its black yoga pants that were unintentionally see-through. The recall, which amounted to approximately 17% of all women's pants sold in its stores, is anticipated to cause shortages of this store staple and is anticipated to have a significant impact on its financial results.[37] Lululemon's Chief Product Officer, Sheree Waterson, announced she would be stepping down following the fallout from the recall.[38] The financial hit on earnings, and the reputational damage to the Lululemon brand are credited with the executive's forced departure.[39] In June 2013, Lululemon's CEO, Christine Day, announced she would be leaving the company.[12]

References

External links

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