Intense competition and stressful lives have led many people to lose their health and well being. As society realizes the ill effects of such lifestyle on overall productivity, a move towards a better and stable work-life balance and the importance of physical fitness has become a top priority in people’s lives.
The result: A major market for fitness products.
Lululemon Athletica inc. (NASDAQ:LULU) is one the major players in the sports apparel segment. The founder’s belief of yoga being an effective way to a healthy and long life coupled with an increasing participation of women in fitness related activities led to the foundation of Lululemon.
The last fiscal was extremely successful for the company. A revenue growth of 37% to $ 1.4 billion and a 31% growth in profits from operations marked the end of another stupendous year of growth. Cash and cash equivalents increased 44% approx. to almost $ 600 million giving the company substantial cushion for investment in new markets and expanding the product line.
The company is now working hard to establish itself in the international markets which is at the heart of their core strategy of growth and has taken active steps to enter markets in Germany, Hong Kong, Australia and UK.
First quarter of 2013 saw the company’s CEO make a sudden announcement to leave the company sending the company’s stock in a tizzy, a fall of 17% in intraday trading. This happened despite decent numbers and ending a controversy involving the quality of LUON pants owing to customer complaints about excessive sheerness of the product which forced the company to pull the product off the stands.
Despite the controversy, the company managed to deliver modest performance in the first quarter achieving a YOY revenue growth of 21% reaching $ 345 million. In addition to that, the direct to consumer sales rose an impressive 40 % to reach $ 54 million.
Moving forward as the Canadian market moves towards saturation and sales in United States decline owing to a tough economic climate and increased competition, the company is now focusing on overseas expansion and plans to boost their presence in Europe and expand in Asia and Australia targeting entry in as many as 15 new countries in the next 2 years.
A macro analysis
The good news is that the global sports apparel industry is set to grow exponentially reaching $ 125 billion by 2017, with an estimated CAGR of 6% driven not just by demand in China and India (which look set to pip North America as the world’s biggest market) but the whole APAC region.