case study2

2/8/22, 3:04 PM Introduction

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CASE 7

lululemon athletica’s Strategy in 2020: Is the Recent Growth in Retail Stores, Revenues, and Profitability Sustainable?

Arthur A. Thompson The University of Alabama

Randall D. Harris Texas A&M University-Corpus Christi

2/8/22, 3:04 PM Introduction

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In May 2020, shareholders of lululemon athletica—a designer and retailer of high-

tech athletic apparel sold under the lululemon athletica and ivivva athletica brand names—were highly pleased with the remarkable turnaround in the company’s

performance since January 2016. Calvin McDonald, who became the company’s

CEO in August 2018, had proven highly adept in continuing to grow the company and boost its profitability somewhat faster than his predecessor had done during

2016 and 2017. Since the end of fiscal 2016 on January 31, 2016, lululemon’s

revenues had almost doubled and net profits were up 243 percent. The number of company-operated stores had increased from 368 stores in 9 countries in February

2016 to 491 stores in 17 countries as of February 2020, and the company’s stock

price had risen from $60.75 in early February 2016 to an all-time high of $343.74 in early August 2020. Average annual sales at lululemon’s retail stores open at least 12

months, which had dropped from a record high of $5.83 million per store in 2012

to $4.57 million in 2015 (a 21.6 percent decline), had climbed back to $5.2 million in fiscal 2020, ending February 2, 2020, while online sales rose from $401 million

in the fiscal year ending January 31, 2016, to $1.14 billion in the fiscal year ending

February 2, 2020.

Going into June 2020, the question lurking for shareholders, given the falloff in retail store sales and customer traffic that most apparel chain retailers were

struggling to overcome not only during the peak months of the COVID-19

pandemic but also from the propensity of many buyers to shift their purchases of

apparel and other products online, was how much longer lululemon would be able to sustain its recent rates of growth in retail stores, revenues, and profitability.