Lululemon in Trouble
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Case Code: BSTR538 Case Length: 15 Pages Period: 2016-2017 Pub Date: 2018 Teaching Note: Available |
Price: Rs.400 Organization: Lululemon Athletica Inc. (LULU) Industry: Clothing Retail Countries: US, Canada, Global Themes: Corporate Strategy, New Product Development, Brand Strategy, Market Assessment |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Toward Healthy and Fun Lives
LULU’s initial vision was to “be a community hub to provide guests with knowledge, tools, and the components to live longer, healthier, and more fun lives.” Later on, Wilson realized that he needed a vision that was scalable and came up with “elevate the world from mediocrity to greatness”.
LULU’s mission was to “create components for people to live long, healthy, and fun lives”. Having realized the existing vacuum in women’s yoga wear apparel, LULU primarily targeted the health conscious sophisticated woman. The company adopted seven core values to help it fulfill its mission. These were – quality, product, integrity, balance, entrepreneurship, fun, and greatness. All the employees of the company were expected to embody these values...
Building the Brand
In collaboration with renowned fabric manufacturers, LULU developed unique fabrics named ‘Luon’ and ‘Silverescent’. Luon consisted of 86 percent nylon and 14 percent lycra. This preshrunk fabric was stretchy and absorbed sweat. At the same time, it was soft, comfortable, and breathable. Subsequently apparel in different types of luon like brushed luon, reversible luon, heather luon, and light luon were introduced by LULU. The Silverescent line had fiber enmeshed with silver that prevented odor causing bacteria in the clothes...
Sheer Pants Fiasco
Notwithstanding its many successes, LULU had found itself embroiled in several controversies since its inception. (Refer to Exhibit III for more details of LULU’s controversies). The biggest controversy involving the company erupted in 2013 over the sheer pants issue. LULU started receiving several complaints that its yoga pants made of luon were too sheer to wear. The bottoms, which sold for US$ 100 each, did not fulfill the quality expectations of the customers and a lot of complaints were registered. The unacceptable level of sheerness was criticized by customers on social media...
The Downs and Ups
The sheer pants and other related quality issues left the company’s brand image badly dented. LULU had to spend millions of dollars on recalling the products. Moreover, investors started questioning the quality control mechanisms that LULU was following. Its same store sales growth also witnessed a decline...
Other Challenges
Moreover, LULU faced tough competition from other big athleisure companies like Under Armour (UA), Nike, and Gap’s Athleta.
In 2016, UA was arguably one of the biggest threats to LULU. In the process of growing revenues in the apparel category, UA was focusing on growing its women’s business, which was LULU’s strong point. Analysts opined that UA being technically bigger would trump LULU tremendously. Nike too had invested in its biggest ever advertising push with the “Better for it”...
The Slump Returns
In March 2017, LULU’s shares crashed by 21 percent. The company noted fewer visitors both in stores and online. Apart from changing trends and growing competition, the slump was attributed to the lack of colors in LULU’s lines. Anna Andreeva, an analyst from Oppenheimer , said, “Lululemon is proving not immune from environment as neutral color palette that worked in [the second half of 2016] isn’t resonating this spring. The consumer wants more fashion/newness.”...
Preparing for a Recovery
By mid-2017, LULU was showing signs of shaking off its slow start to the year. It kicked off its national brand campaign ‘This is Yoga’ , its ship-from-store offer gained traction, and launched new products such as bottoms and sports bras....
Exhibits
Exhibit I: Logo - Lululemon
Exhibit II: Lululemon Athletica Inc. Revenue (2012-2016)
Exhibit III: More Controversies
Exhibit IV: Lululemon Athletica Inc. Stock Chart (September 2012- May 2017)
Exhibit V: Lulu’s online Sales Revenue (in Million $)
Exhibit VI: Retail Units Closing in the USA (1995-2017)
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