Lululemon’s revenue topped $7b in 2020 and if the first quarter is to judge, 2021 will be another chart topper. Turnover was up 88% topping the company’s own guidance and analysts’ forecasts.
The brand is a growth stock with average annual compound growth close to 20% far surpassing the 4% industry average. Cash reserves exceed $1.5b.
Lululemon’s core target are younger professional women who take a proactive approach to health management. It’s a wealthy and very western educated demographic.
This demographic is the brand’s sweet spot and one that’s tough for Nike and Adidas to reach, given their masculine positioning.
The business was founded in 1998 in Canada and quickly spread south. North America accounts for the majority of revenue, although executives say there’s no reason International shouldn’t be 50%.
Lululemon’s management are on record as committing $1.5b in international sales from 2023.
It’s no surprise that the brand’s footprint coincides with markets where yoga over indexes. Canada and the US is one of course, but so too Australia; and let’s not forget China where there are over 50 outlets. These markets have been prioritised over Europe. I was surprised to find there are more stores in ANZ than the UK or Germany.
The company has learnt that one size does not fit all for international success. Colours and yes sizes have been changed to fit local physiques.
Lululemon is also dialling up a subscription revenue business model. Just two weeks ago it acquired Mirror, an interactive home gym brand, founded by an ex-ballet dancer. There is a heavy cross-over between Lululemon and Mirror customers.
Contrary to the continuous revenue growth story, the share price has oscillated over the last year. Last July it hit $400 but has since dropped back to $320. The Mirror acquisition received a thumbs up from the stock market. According to the FT who track a sample of 33 analysts, there is not a single ‘sell’ recommendation, on the contrary 22 have rated the stock ‘buy’ or ‘outperform’.