business

COMPANY PROFILE

lululemon athletica inc.

REFERENCE CODE: 38A69AD7-73A0-442F-9B5B-F05958AFAC6F PUBLICATION DATE: 28 Feb 2014 www.marketline.com COPYRIGHT MARKETLINE. THIS CONTENT IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED OR DISTRIBUTED.

TABLE OF CONTENTS

Company Overview..............................................................................................3

Key Facts...............................................................................................................3

Business Description...........................................................................................4

History...................................................................................................................5

Key Employees.....................................................................................................6

Key Employee Biographies..................................................................................7

Major Products and Services............................................................................12

Revenue Analysis...............................................................................................13

SWOT Analysis...................................................................................................14

Top Competitors.................................................................................................19

Company View.....................................................................................................20

Locations and Subsidiaries...............................................................................24

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lululemon athletica inc. TABLE OF CONTENTS

COMPANY OVERVIEW

lululemon athletica inc. (lululemon or ‘the company’) is a designer and retailer of technical athletic apparel. The company offers a wide range of performance apparel and accessories, including fitness pants, shorts, tops and jackets designed for healthy lifestyle activities such as yoga, running, dancing and general fitness. lululemon primarily operates in North America and Australia. It is headquartered in British Columbia, Canada and employed 6,383 people as of February 3, 2013.

The company recorded revenues of $1,370.4 million in the financial year ended January 2013 (FY2013), an increase of 36.9% over FY2012. The operating profit of the company was $376.4 million in FY2013, an increase of 31.2% over FY2012. The net profit was $270.6 million in FY2013, an increase of 47% over FY2012.

The company's financial year ends on the Sunday closest to January 31. FY2013 was a 53-week period and FY2012 was a 52-week period.

KEY FACTS

lululemon athletica inc.Head Office 1818 Cornwall Avenue Vancouver British Columbia V6J 1C7 CAN

1 604 732 6124Phone

Fax

http://www.lululemon.comWeb Address

1,370.4Revenue / turnover (USD Mn)

JanuaryFinancial Year End

6,383Employees

LULUNASDAQ Global Select Market Ticker

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lululemon athletica inc. Company Overview

BUSINESS DESCRIPTION

lululemon designs, manufactures and distributes technical athletic apparel for healthy lifestyle activities such as yoga, running, general fitness and dancing. lululemon offers yoga apparel under the lululemon athletica and ivivva athletica brand names. The company has operations in Canada, the US, Australia, New Zealand, the UK and Hong Kong.

The company operates through three business segments: corporate-owned stores, direct to consumer and other.

The corporate-owned stores segment includes sales to customers through company-owned stores in North America, Australia and New Zealand. At the end of FY2013, lululemon sold products through 211 company-owned stores, of which 135 were located in the US, 51 in Canada, 23 in Australia and two in New Zealand. The direct to consumer segment includes sales from the company’s e-commerce websites, including www.lululemon.com, www.ivivva.com, and other country and region specific websites. The other segment includes wholesale accounts, revenue from franchises, sales from company-operated showrooms and warehouse sales.

The company offers a full line of performance apparel and accessories for women, men and female youth. It offers a wide range of fitness-related accessories such as bags, socks, underwear, yoga mats, instructional yoga digital versatile discs (DVDs) and water bottles. lululemon also sells athletica products through premium yoga studios, health clubs and fitness centers.

lululemon operates three distribution facilities located in Vancouver, British Columbia; Sumner, Washington; and Melbourne, Victoria.

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lululemon athletica inc. Business Description

HISTORY

lululemon was founded in 1998 by Dennis Chip Wilson. In 2000, the company opened its first store under the name Kitsilano in the beach area of Vancouver, British Colombia.

In 2004, the company opened its first store in Australia which was operated under a franchise license. lululemon partnered with Advent International, a private equity firm, in the year 2005 for Advent International to hold a significant minority interest in lululemon. This transaction supported the company's growth strategy in the US and internationally and provided partial liquidity to the founder Dennis Chip Wilson. In the following year, the company entered into a partnership with Descente, to establish the joint venture 'lululemon Japan'.

In 2007, the company was listed on The NASDAQ Stock Market under the trading symbol 'LULU'.

In FY2009, lululemon opened its first company-operated showroom in Hong Kong.

The company launched a new brand, ivivva athletica, for the younger generation in 2009.

In 2010, lululemon increased the equity interest in its Australian joint venture partner, New Harbour Yoga, from 13% to 80.3%.

In the following year, the company launched ivivva athletica's Canadian online store at ivivva.com. lululemon also launched ivivva athletica's US online store.

lululemon athletica Canada, a subsidiary of lululemon, Calvin Klein, a wholly-owned subsidiary of PVH, and G-III Apparel Group, a Calvin Klein licensee for Calvin Klein Performance, entered into a settlement agreement to resolve the pending design patent litigation related to yoga pant designs, in 2012.

During FY2013, the company purchased the remaining non-controlling interest in its Australian joint venture partner. lululemon also opened its first company-operated showroom in the UK during the same period. The company launched country and region specific websites in Australia, Europe and Asia in FY2013 to provide its online customers with local content, assortment and pricing.

In June 2013, the company delisted its shares from the Toronto Stock Exchange.

In September 2013, lululemon athletica Canada entered into a partnership with Noble Biomaterials, to use Noble Biomaterials’ X-STATIC antimicrobial technology in its performance apparel lines. X-STATIC is designed to provide permanent odor protection by naturally stopping the growth of bacteria on the surface of fabrics.

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lululemon athletica inc. History

KEY EMPLOYEES

CompensationBoardJob TitleName

Executive BoardChief Executive OfficerLaurent Potdevin

248579 USDNon Executive BoardChairmanDennis J. Wilson

Non Executive BoardDirectorRobert Bensoussan

200331 USDNon Executive BoardLead DirectorMichael Casey

179013 USDNon Executive BoardDirectorRoAnn Costin

73412 USDNon Executive BoardDirectorWilliam H. Glenn

191624 USDNon Executive BoardDirectorMartha A. M. Morfitt

183013 USDNon Executive BoardDirectorRhoda M Pitcher

194819 USDNon Executive BoardDirectorThomas G. Stemberg

177013 USDNon Executive BoardDirectorEmily White

1641127 USDSenior ManagementChief Financial Officer and Executive Vice President

John E. Currie

Senior ManagementChief Product OfficerTara Poseley

1506708 USDSenior ManagementExecutive Vice President, Retail Operations North America

Delaney Schweitzer

1883495 USDSenior ManagementSenior Vice President, Brand and Community

Laura Klauberg

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lululemon athletica inc. Key Employees

KEY EMPLOYEE BIOGRAPHIES

Laurent Potdevin

Board: Executive Board Job Title: Chief Executive Officer Since: 2014

Mr. Potdevin has been the Chief Executive Officer and a Director at lululemon since January 2014. Previously, he served as the President at TOMS Shoes. Mr. Potdevin also held several positions at Burton Snowboards for more than 15 years, including President and Chief Executive Officer from 2005 to 2010. His earlier roles at Burton Snowboards included President and Chief Operating Officer as well as Director of Operations. Mr. Potdevin began his career in 1991 at LVMH.

Dennis J. Wilson

Board: Non Executive Board Job Title: Chairman Since: 1998 Age: 57

Mr. Wilson has been the Chairman of the Board of Directors at lululemon since 1998. He founded the company in 1998. Mr. Wilson served as the Chief Innovation and Branding Officer from 2010 to 2012 and as the Chief Product Designer from 2005 to 2010. He also served as the Chief Executive Officer at lululemon from 1998 to 2005. In 1980, Mr. Wilson founded Westbeach Snowboard, a retailer of surf, skate and snowboard verticals, and served as its Chief Executive Officer from 1980 to 1995 and as its Head of Design and Production from 1995 to 1997.

Robert Bensoussan

Board: Non Executive Board Job Title: Director Since: 2013 Age: 54

Mr. Bensoussan has been a Director at lululemon since 2013. He has been a Director and the majority owner of Sirius Equity since 2008. From 2008 to 2012, Mr. Bensoussan served as the Executive Chairman and Chief Executive Officer at LK Bennett, and has been its Non Executive Chairman since 2012. He also has been the Non Executive Chairman at Jeckerson Spa (Italy) since 2008 and at feelunique.com (UK) since 2012. From 2001 to 2007, Mr. Bensoussan was the Chief Executive Officer at Jimmy Choo and from 2001 to 2011 he was a member of the Board at Jimmy

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lululemon athletica inc. Key Employee Biographies

Choo. He is a Board member at Interparfums. Mr. Bensoussan is also a member of the Board at Celio International (Belgium), Zen Cars (Belgium) and Aurenis (France).

Michael Casey

Board: Non Executive Board Job Title: Lead Director Age: 67

Mr. Casey is the Lead Director at lululemon. He has been a Director at the company since 2007. Mr. Casey retired from Starbucks in 2007, where he served as a Senior Vice President and the Chief Financial Officer from 1995 to 1997 and as an Executive Vice President, the Chief Financial Officer and Chief Administrative Officer from 1997 to 2007. Prior to joining Starbucks, he was an Executive Vice President and the Chief Financial Officer at Family Restaurant, and the President and Chief Executive Officer at EI Torito Restaurants.

RoAnn Costin

Board: Non Executive Board Job Title: Director Since: 2007 Age: 60

Ms. Costin has been a Director at lululemon since 2007. She has been the President at Wilderness Point Investments since 2005. Ms. Costin co-founded Paola Quadretti Worldwide in 2011 and serves as its Chairman of the Board. From 1992 to 2005, she served as the President at Reservoir Capital Management. Ms. Costin serves on the Board at Olly Shoes, City Sports and Alvin Valley.

William H. Glenn

Board: Non Executive Board Job Title: Director Since: 2012 Age: 56

Mr. Glenn has been a Director at lululemon since 2012. He is the President at Global Commercial Services and an Executive Officer at American Express Company. Mr. Glenn joined American Express Company in 2002 where he served as the President of the Merchant Services division. Prior to that, he served as the President of Pepsi-Cola North America's Food Service Division. Mr. Glenn began his career at Procter & Gamble. He is a member of the Board of Trustees of the Boys and Girls Clubs of America and the US Travel Association Chief Executive Officer Roundtable.

Martha A. M. Morfitt

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lululemon athletica inc. Key Employee Biographies

Board: Non Executive Board Job Title: Director Since: 2008 Age: 55

Ms. Morfitt has been a Director at lululemon since 2008. She has been a Principal at River Rock Partners since 2008. Ms. Morfitt served as the Chief Executive Officer at Airborne from 2009 to 2012. She served as the President and Chief Executive Officer at CNS from 2001 to 2007 and as its Chief Operating Officer from 1998 to 2001. Ms. Morfitt serves as a Director at Graco, and Life Time Fitness.

Rhoda M Pitcher

Board: Non Executive Board Job Title: Director Since: 2005 Age: 58

Ms. Pitcher has been a Director at lululemon since 2005. She has been the Managing Partner at Rhoda M Pitcher, a management consulting firm, since 1996. From 1978 to 1997, Ms. Pitcher co-founded, built and sold two international consulting firms.

Thomas G. Stemberg

Board: Non Executive Board Job Title: Director Since: 2005 Age: 64

Mr. Stemberg has been a Director at lululemon since 2005. He has been the Managing Partner at Highland Consumer Fund since 2007. From 2005 to 2007, Mr. Stemberg was a Venture Partner at Highland Capital Partners. He co-founded Staples, and served as its Chairman from 1988 to 2005, and as its Chief Executive Officer from 1986 until 2002. Mr. Stemberg serves as a Director at CarMax, PetSmart, and Guitar Center.

Emily White

Board: Non Executive Board Job Title: Director Since: 2011 Age: 34

Ms. White has been a Director at lululemon since 2011. She is the Director of Business Operations of Instagram at Facebook. From 2010 to 2012, Ms. White was the Senior Director of Local and

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lululemon athletica inc. Key Employee Biographies

Mobile Partnerships at Facebook. Prior to joining Facebook, she was at Google running the North America Online Sales and Operations channel from 2001 to 2007 and the Asia Pacific and Latin America businesses from 2007 to 2009. Ms. White ran the Local and Commerce monetization businesses at Google from 2009 to 2010. She serves on the Board of the National Centre for Women in Information Technology.

John E. Currie

Board: Senior Management Job Title: Chief Financial Officer and Executive Vice President Since: 2007 Age: 57

Mr. Currie has been an Executive Vice President and the Chief Financial Officer at lululemon since 2007. Prior to joining the company, he worked at Intrawest Corporation, a provider of destination resorts and leisure travel, from 1996 to 2006, including as Chief Financial Officer from 2004 to 2006 and Senior Vice President, Financing and Taxation from 1997 to 2004. Prior to joining Intrawest, Mr. Currie held senior financial positions at the BCE group. He is a member of the Board of Directors at Vancouver Airport Authority, and Clearly Contacts.

Tara Poseley

Board: Senior Management Job Title: Chief Product Officer Since: 2013

Ms. Poseley has been the Chief Product Officer at lululemon since 2013. She has 25 years of experience in product development, merchandising and brand management for both large-scale and entrepreneurial businesses. Ms. Poseley most recently served as the President at Kmart Apparel. Previously, she was the Interim President at bebe Stores, the President at Disney Stores North America (The Children's Place), and the Chief Executive Officer at Design Within Reach. Ms. Poseley also held various senior merchandising and design management positions during her 15 year tenure at The Gap.

Delaney Schweitzer

Board: Senior Management Job Title: Executive Vice President, Retail Operations North America Since: 2010 Age: 41

Ms. Schweitzer has been the Executive Vice President of Retail Operations North America at lululemon since 2010. She began her career at lululemon in 2002. Ms. Schweitzer served in various

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lululemon athletica inc. Key Employee Biographies

capacities at lululemon, including Director of Training and Culture, and Director of Original Intent. Prior to joining the company, she spent 10 years in the hospitality industry as a General Manager.

Laura Klauberg

Board: Senior Management Job Title: Senior Vice President, Brand and Community Since: 2012 Age: 58

Ms. Klauberg has been the Senior Vice President of Brand and Community at lululemon since 2012. She was the Senior Vice President of Global Media at Unilever previously. Ms. Klauberg was the Senior Vice President of Global Marketing for Unilever Cosmetics International, and prior to that, she was the Vice President of Skin Care for North America region. She held a variety of brand marketing roles throughout her career at Unilever. Prior to joining Unilever, Ms. Klauberg joined Cheseborough-Pond's from Clairol, where she first began her career in brand management. She serves as a Director at Seventh Generation.

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lululemon athletica inc. Key Employee Biographies

MAJOR PRODUCTS AND SERVICES

lululemon is a designer and retailer of technical athletic apparel. The company's key products include the following:

Products:

For women:

Sports bras Tanks Tops Jackets and hoodies Pants Pants by fit Crops Shorts Skirts and dresses

For men:

Tops Jackets and hoodies Shorts Pants

Accessories:

Bags Headwear and scarves for women Socks and underwear Yoga mats and props Water bottles Seasonal accessories

Brands:

lululemon athletica ivivva athletica

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lululemon athletica inc. Major Products and Services

REVENUE ANALYSIS

Overview

The company recorded revenues of $1,370.4 million in FY2013, an increase of 36.9% over FY2012. For FY2013, the US, the company's largest geographic market, accounted for 61.3% of the total revenues.

lululemon generates revenues through three business segments: corporate-owned stores (79.6%* of the total revenues in FY2013), direct to consumer (14.4%) and other (6.1%).

*Percentages are rounded-off.

Revenues by segment

In FY2013, the corporate-owned stores segment recorded revenues of $1,090.2 million, an increase of 33.4% over FY2012.

The direct to consumer segment recorded revenues of $197.3 million in FY2013, an increase of 85.5% over FY2012.

The other segment recorded revenues of $82.9 million in FY2013, an increase of 6.9% over FY2012.

Revenues by geography

The US, lululemon's largest geographical market, accounted for 61.3% of the total revenues in FY2013. Revenues from the US reached $839.9 million in FY2013, an increase of 56.6% over FY2012.

Canada accounted for 33.7% of the total revenues in FY2013. Revenues from Canada reached $461.6 million in FY2013, an increase of 8.4% over FY2012.

Outside of North America accounted for 5% of the total revenues in FY2013. Revenues from outside of North America reached $68.9 million in FY2013, an increase of 76.9% over FY2012.

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lululemon athletica inc. Revenue Analysis

SWOT ANALYSIS

lululemon is a designer and retailer of technical athletic apparel. The company follows a distinctive community-based strategy, which enhances its appeal while reinforcing its brand image. It also improves its customer loyalty. However, increasing competition in the athletic apparel industry could lead to pricing pressures, which, in turn, could reduce the company's profits.

WeaknessesStrengths

Dependence on third-party suppliers and manufacturers

Community-based strategy Multi-channel approach Strong financial performance

ThreatsOpportunities

Intense competitionStore network expansion Rising labor wages in the US and CanadaRising popularity of e-commerce

Strengths

Community-based strategy

The company follows a distinctive community-based strategy. lululemon designs and develops innovative athletic apparel with focus centered on performance, comfort, functionality and style. The company designs and develops athletic apparel by incorporating real-time customer feedback and by collaborating with its third-party suppliers. Through feedback-based design process, the company’s design and product development team seeks input from its customers and local fitness practitioners. lululemon’s close collaboration with its suppliers allows it to formulate technically-advanced fabrics for its products. The company’s vertical retail strategy enables it to bring select products to market in a very short time (two months), allowing it to respond quickly to customer feedback. As part of the community-based strategy, the company also locates its stores in street locations, lifestyle centers and malls that position each lululemon store as an integral part of its community. It also provides 30 hours of in-house training to its store sales associates, within the first three months of their employment, to develop a personal connection with each customer. The company’s educational store environment facilitates product trial and repeat visits. lululemon also uses a community-based marketing approach that covers social media, local ambassadors, hosting community events and creating in-store community boards, to increase brand awareness. Thus, a distinctive community-based strategy enhances the company’s appeal while reinforcing its brand image. It also increases customer loyalty.

Multi-channel approach

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lululemon athletica inc. SWOT Analysis

The company offers its products through company-operated retail stores, showrooms, and e-commerce websites. At the end of FY2013, the company operated 135 stores in the US, 51 stores in Canada, 23 stores in Australia and two in New Zealand. Most of these stores are operated under the lululemon athletica brand name. The company also operates eight of its corporate-owned stores under ivivva athletica brand name, specializing in dance-inspired apparel for female youth. The company-operated retail stores are located primarily on street locations, in lifestyle centers and in malls. In addition, at the end of FY2013, lululemon operated one showroom each in Australia, the UK and New Zealand, and two in Hong Kong. This channel accounted for less than 10% of the company’s net revenues in FY2013. The company also sells its products through e-commerce websites, including www.lululemon.com, www.ivivva.com and other country and region specific websites. This channel represented 14% of the company’s net revenues in FY2013. lululemon also sells lululemon athletica products through wholesale channel, including premium yoga studios, health clubs and fitness centers. These locations offer an alternative distribution channel that is convenient for its core consumers. The company generated 2% of its revenues from this channel during FY2013. lululemon also offers its products through warehouse sales and outlets. Therefore, the multi-channel approach increases the company’s reach and enables it to cater to a wide customer base. This, in turn, helps lululemon to enhance its market presence.

Strong financial performance

The company has a strong financial position, indicated by its revenue growth despite the economic downturn and its consequences. lululemon has witnessed a steady growth in its revenues over many years. The company’s revenues increased at a compound annual growth rate (CAGR) of 40% from $353.5 million in FY2009 to $1,370.4 million in FY2013. As compared to FY2012, the revenues of lululemon grew by 36.9% in FY2013. The revenues increased due to the addition of 37 retail locations, and comparable store sales growth of 16% in FY2013. The company's profitability also increased significantly. The operating profit and net profit of the company grew at a CAGR of 61% and 62%, respectively, during FY2009–13. The operating profit and net profit grew by 31.2% and 47%, respectively, in FY2013 over FY2012. The increase in profits was primarily due to increased gross profit of $193.5 million, resulting from sales growth at existing and additional corporate-owned stores opened during FY2013, growing traffic on the company’s e-commerce website, the addition of regional websites and a $2.5 million increase in other income. Moreover, lululemon has no debt. Strong financial performance will provide the company with financial flexibility and also help in expansion activities.

Weaknesses

Dependence on third-party suppliers and manufacturers

lululemon depends on third-party suppliers and manufacturers outside the US to provide fabrics and to produce its products, and therefore, has little control over the quality of products. In FY2013, approximately 60% of the company’s products were produced by its top five suppliers. During the same period, nearly 54% of lululemon’s products were produced in South/South East Asia, approximately 34% in China, approximately 3% in North America and the remainder in the Peru,

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lululemon athletica inc. SWOT Analysis

Israel, Egypt and other countries. The company has no long term contracts with its suppliers or manufacturers. Therefore, any failure on the part of manufacturers to achieve and maintain high manufacturing standards could result in manufacturing errors resulting in product recalls or withdrawals, delays or interruptions in production, cost overruns or other problems that could seriously harm the company's business. The company's reliance on third party suppliers makes it difficult to ensure the quality of the goods sold in its outlets, and may lead to product recalls. This, in turn, could have an adverse effect on customer retention and brand loyalty.

Opportunities

Store network expansion

The company has taken significant initiatives to expand its store network in the recent past. During FY2013, the company opened 27 stores in the US and four stores in Canada, including three ivivva athletica branded stores. In FY2014, lululemon plans to open up to 38 stores, including three ivivva athletica branded stores in North America. The company has also been expanding its presence beyond North America. At the end of FY2013, the company operated 23 corporate-owned stores and one showroom in Australia, two corporate-owned stores and one showroom in New Zealand, two showrooms in Hong Kong, and one showroom in the UK. lululemon plans to open approximately five lululemon stores in Australia and New Zealand in FY2014. Over the next two years, the company intends to open additional showrooms as pre-seeding activities in the Asian and European markets. Expanding the store footprint will allow lululemon to penetrate markets quickly. Store expansions will enable the company to expand its geographical presence and take advantage of growth opportunities in foreign markets.

Rising popularity of e-commerce

e-commerce sales have been growing at a fast pace in recent times as the online channel is growing in popularity as the most preferred channel for several customers. According to the US Department of Commerce, online retail sales (adjusted for seasonal variation) in the US increased from $165.8 billion in 2010 to $262.5 billion in 2013, representing a compound annual growth rate (CAGR) of 16.6%. e-commerce sales increased 17% in 2013 over the previous year. Total retail sales, on the other hand, grew by only 4.3% during 2013. e-commerce sales accounted for 5.8% of total retail sales in 2013, compared to 4.3% in 2010. In Canada, more than half of the internet users ordered products and services online in 2012 according to Statistics Canada. Canadian e-commerce sales are expected to grow at a rate of 10% during 2013–18 according to industry sources. A similar trend was noticed in the European market. According to industry estimates, the online retail sales in Europe are expected to increase by more than 70% from 2012 to reach approximately $255 billion by 2017. Online retail sales are estimated to grow at a strong rate in Asia as well.

The company offers all of its products online at www.lululemon.com, www.ivivva.com and through other country and region specific websites in Australia, Europe and Asia. Revenues of the company’s direct to consumer segment grew by 85.5% in FY2013 over FY2012. By leveraging its offerings

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lululemon athletica inc. SWOT Analysis

online, the company can tap into the customer base which is increasingly using the web in search of better deals.

Threats

Intense competition

The market for technical athletic apparel is highly competitive. The competition in the athletic apparel industry is based on brand image and recognition, as well as product quality, innovation, style, distribution and price. lululemon competes with wholesalers and direct sellers of athletic apparel, including Nike, adidas and Under Armour. The company also competes with retailers specifically focused on women’s athletic apparel including The Gap (including the Athleta brand), Lucy Activewear, and bebe stores (including the BEBE SPORT collection). lululemon also faces competition from Montreal-based Lole, which has been shifting into the athletic apparel space by expanding its line of yoga wear, outerwear, tennis wear and vacation wear. In addition, lululemon faces price wars from Target and Wal-Mart Stores, which sell products at lower prices. For instance, Target sells yoga pants and Wal-Mart Stores sells a pair of athletic pants, suitable for yoga. Increasing competition could lead to pricing pressures, which, in turn, could reduce the company's profits.

Rising labor wages in the US and Canada

In recent years, labor costs have been rising in the US and Canada, the company’s key markets. The federal minimum wage rate in the US, which remained at $5.15 per hour since 1998, increased to $5.85 per hour in 2008. It further increased to $6.55 per hour in 2009 and to $7.25 per hour in 2010. Moreover, many states and municipalities in the country have minimum wage rates even higher than $7.25 per hour due to higher cost of living. The minimum wage rate has increased in the states of Arizona (from $7.80 in 2013 to $7.90 in 2014), Colorado (from $7.78 in 2013 to $8 in 2014), Florida (from $7.79 in 2013 to $7.93 in 2014), Ohio (from $7.85 in 2013 to $7.95 in 2014), Oregon (from $8.95 in 2013 to $9.10 in 2014) and Washington (from $9.19 in 2013 to $9.32 in 2014) in the recent past.

In Canada, the minimum wages across several provinces have been steadily rising. For instance, in Ontario, the minimum wage rate has increased from C$8.75 ($8.75) per hour in March 2008 to C$9.50 ($9.50) per hour in March 2009. It further increased to C$10.25 ($10.25) per hour in March 2010. Similarly, the minimum wage in Quebec increased from C$8.50 ($8.50) per hour in May 2008 to C$9 ($9) per hour in May 2009. It further increased to C$9.50 ($9.50) per hour and C$9.65 ($9.65) per hour in May 2010 and May 2011, respectively. The minimum wage in Quebec further increased from C$9.90 ($9.90) per hour in May 2012 to C$10.15 ($10.15) per hour in May 2013. The minimum wage in Nova Scotia has also been increasing since 2010. The minimum wage in Nova Scotia increased from C$9.20 ($9.20) per hour in April 2010 to C$9.65 ($9.65) per hour in October 2010. It further increased to C$10 ($10) per hour in October 2011. In April 2012, the minimum wage in Nova Scotia increased to C$10.15 ($10.15) per hour. The minimum wage in Nova Scotia increased by 1.5% to C$10.30 ($10.30) per hour effective April 1, 2013.

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lululemon athletica inc. SWOT Analysis

The company's cost structure will be negatively impacted by the rising labor wages. It could impact the margin expansion adversely and affect the company’s profitability.

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lululemon athletica inc. SWOT Analysis

TOP COMPETITORS

The following companies are the major competitors of lululemon athletica inc.

NIKE, Inc. Under Armour, Inc. bebe stores, inc. The Gap, Inc. adidas AG Target Corporation Wal-Mart Stores, Inc. Lole Inc. Lucy Activewear Inc.

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lululemon athletica inc. Top Competitors

COMPANY VIEW

An excerpt from the ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’ section is given below. The statement has been taken from lululemon’s 10-K filing for FY2013.

Overview

Our results for fiscal 2012 demonstrate the ongoing success of our efforts to execute the goals we set at the end of last year. We committed to continued investment in our stores and our people, making infrastructure enhancements and funding working capital requirements, while remaining conscious of our discretionary spending. These goals included driving store productivity along with North American store build out and ecommerce, seeding international markets via a community, showroom and ecommerce model, and reinvesting in product innovation to create value and differentiation in our product lines and to enhance our leadership position for the long term. We continually assess the economic environment and market conditions when making decisions regarding timing of our investments.

Our investments in our stores and people were reflected in our comparable stores net revenue growth, which leveraged our fixed operating costs. We increased our store base through execution of our real estate strategy, when and where we saw opportunities for success. For example, we opened 37 new corporate-owned stores in North America, Australia, and New Zealand since fiscal 2011. Where we find opportunities for growth through opening showrooms, or other community presence efforts, we expect to expand our store base and therefore our business. Our growth strategy relies on positive comparable store sales and expansion in North America, particularly in the United States. We have also determined that international growth is an opportunity and are expanding our foothold in markets by establishing local community connections, distributing to strategic sales partners and opening showrooms where we feel our key guests are shopping.

Throughout fiscal 2012, we were able to grow our e-commerce business which has further increased our brand awareness and has made our product available in new markets, including those outside of North America. This sales channel offers a higher operating margin than our other segments and accounted for 16.1% of total revenue in the fourth quarter of fiscal 2012 compared to 13.5% of total revenue in the same period of the prior year. Continuing increases in traffic and conversion rates on our e-commerce website lead us to believe that there is potential for our direct to consumer segment to become an increasingly substantial part of our business and we plan to continue to commit a portion of our resources to further developing this channel. In fiscal 2012 we launched country and region specific websites in Australia, Europe and Asia to provide our online guests with local content, assortment and pricing.

In mid-March 2013, we determined that certain shipments of women’s black Luon bottoms received from our factories and available in our stores from March 1, 2013, did not meet our technical specifications. As we became aware of this issue, we pulled what we believe to be all of the affected

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lululemon athletica inc. Company View

items from our stores, showrooms and e-commerce sites and began working with our supplier to replace the fabric and with our other manufacturers to replace these items as quickly as possible. The lost revenue, additional costs expected to be incurred and the write down of affected product on hand from this issue will negatively impact our results from operations in Fiscal 2013.

We believe that our brand is recognized as premium in our offerings of run and yoga assortment, as well as a leader in technical fabrics and functionality. This has made our product desirable to our consumers and has driven demand, which we are able to meet given our increased product depth compared to last year. Delivering quality to our customers is a critical factor in our market place differentiation and removing items that do not meet our standards is key to maintaining our brand reputation. In fiscal 2013, we plan on investing in new and legacy information technology systems to develop new capabilities in our vertical retail strategy. We have recently added strong leadership in Quality Control, our Liason Office and our commercialization and development teams, and expect these people and other investments to solidify our quality consistency and our delivery capabilities. We believe our strong cash flow generation, solid balance sheet and healthy liquidity provide us with the financial flexibility to continue executing the initiatives which we believe will lead to quality growth.

Operating Segment Overview

lululemon is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. Our yoga-inspired apparel is marketed under the lululemon athletica and ivivva athletica brand names. We offer a comprehensive line of apparel and accessories including fitness pants, shorts, tops and jackets designed for athletic pursuits such as yoga, running and general fitness, and dance-inspired apparel for female youth. As of February 3, 2013, our branded apparel was principally sold through 211 corporate-owned stores that are located in the United States, Canada, Australia and New Zealand and via our e-commerce websites through our direct to consumer sales channel. We believe our vertical retail strategy allows us to interact more directly with and gain insights from our customers while providing us with greater control of our brand. In fiscal 2012, 61% of our net revenue was derived from sales of our products in the United States, 34% of our net revenue was derived from the sales of our products in Canada and 5% of our net revenue was derived from sales of our products outside of North America. In fiscal 2011, 53% of our net revenue was derived from sales of our products in the United States, 43% of our net revenue was derived from the sales of our products in Canada and 4% of our net revenue was derived from sales of our products outside of North America. In fiscal 2010, 46% of our net revenue was derived from sales of our products in the United States, 52% of our net revenue was derived from the sales of our products in Canada and 2% of our net revenue was derived from sales of our products outside of North America.

Our net revenue increased from $1,000.8 million in fiscal 2011 to $1,370.4 million in fiscal 2012, representing a 37% increase. Our increase in net revenue from fiscal 2011 to fiscal 2012 resulted from the addition of 37 retail locations, and comparable store sales growth of 16% in fiscal 2012, excluding the impact of the 53rd week. Our ability to open new stores and grow sales in existing stores has been driven by increasing demand for our technical athletic apparel and a growing recognition of the lululemon athletica brand. We believe our superior products, strategic store

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lululemon athletica inc. Company View

locations, inviting store environment, grassroots marketing approach and distinctive corporate culture are responsible for our strong financial performance.

We have three reportable segments: corporate-owned stores, direct to consumer and other. We report our segments based on the financial information we use in managing our businesses. While we receive financial information for each corporate-owned store, we have aggregated all of the corporate-owned stores into one reportable segment due to the similarities in the economic and other characteristics of these stores. Our corporate-owned stores segment accounted for 80% of our net revenue in fiscal 2012, 82% in fiscal 2011 and 83% in fiscal 2010. Our direct to consumer segment accounted for 14% of our net revenue in fiscal 2012, 11% in fiscal 2011 and 8% in fiscal 2010. Our other segment, consisting of franchise sales, wholesale accounts, sales from company-operated showrooms, warehouse sales and outlets, each accounted for less than 10% of our net revenue in each of fiscal 2012, fiscal 2011 and fiscal 2010. We previously reported our franchise channel as an operating segment; however, we reacquired our remaining four franchised stores in fiscal 2011 and opening new franchise stores is not part of our growth strategy.

As of February 3, 2013, we sold our products through 211 corporate-owned stores located in, the United States, Canada, Australia, and New Zealand. We plan to increase our net revenue in North America and Australia by opening additional corporate-owned stores in new and existing markets. Corporate-owned stores accounted for 80% of total net revenue in fiscal 2012, 82% of total net revenue in fiscal 2011 and 83% of total net revenue in fiscal 2010.

As of February 3, 2013, our direct to consumer segment included our lululemon and ivivva e-commerce websites. E-commerce sales are taken directly from retail customers through www.lululemon.com and www.ivivva.com and other country and region specific websites. Our direct to consumer segment is an increasingly substantial part of our growth strategy, and now represents 14% of our net revenue.

In addition to deriving revenue from sales through our corporate-owned stores and direct to consumer, we also derive other net revenue, which includes wholesale customers, as well as warehouse sales and sales through a number of company-operated showrooms and temporary locations. Wholesale customers include select premium yoga studios, health clubs and fitness centers. Warehouse sales are typically held one or more times a year to sell slow moving inventory or inventory from prior seasons to retail customers at discounted prices. Our showrooms are typically small locations that we open from time to time when we enter new markets and feature a limited selection of our product offering during select hours. Our temporary locations are typically opened for the holiday season in markets in which we may not already have a presence. We reacquired our four remaining franchise stores during fiscal 2011, and as such, franchise sales, which included inventory sales and royalties, are no longer a part of our other net revenue. Other net revenue accounted for 6% of total revenue in fiscal 2012, 7% of total net revenue in fiscal 2011 and 9% of total net revenue in fiscal 2010.

We believe that our athletic apparel has and will continue to appeal to consumers outside of North America who value its technical attributes as well as its function and style. In 2004, we opened our first store in Australia which was operated under a franchise license. In fiscal 2009 we made a 13% equity investment in lululemon athletica australia Pty, our franchise operator. During fiscal 2010 we

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lululemon athletica inc. Company View

increased our investment to 80% which provided us with control over lululemon athletica australia Pty. During fiscal 2012 we purchased the remaining noncontrolling interest in lululemon athletica australia Pty. In fiscal 2008, we opened our first company-operated showroom in Hong Kong and in fiscal 2012 we opened our first company-operated showroom in the United Kingdom.

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lululemon athletica inc. Company View

LOCATIONS AND SUBSIDIARIES Head Office

lululemon athletica inc. 1818 Cornwall Avenue Vancouver British Columbia V6J 1C7 CAN P:1 604 732 6124 http://www.lululemon.com

Other Locations and Subsidiaries

lululemon athleticalululemon athletica Unit O202B5490 Spring Garden 1485 Portage AvenueHalifax WinnipegNova Scotia ManitobaB3J 1G3 R3G 0W4CAN CAN

lululemon athleticailululemon athletica 272 Darling Street239 Ponsonby Road SydneyAuckland 1011 New South Wales 2041NZL AUS

lululemon athleticalululemon athletica 166 Smith Street2956 College Avenue BrooklynBerkeley New York 11201California 94705 USAUSA

Ivivva athleticaIvivva athletica 287 Lakeshore Road East201 - 410 Bernard Avenue OakvilleKelowna OntarioBritish Columbia L6J1J3V1Y6N7 CANCAN

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lululemon athletica inc. Locations and Subsidiaries

Ivivva athleticaIvivva athletica Suite E 7051 East Fifth Avenue2036 - 575 Bellevue Square ScottsdaleBellevue Arizona 85251Washington 98004 USAUSA

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lululemon athletica inc. Locations and Subsidiaries

MARKETLINE | 119 FARRINGDON ROAD | LONDON, UNITED KINGDOM, EC1R 3DA T: +44 161 238 4040 | F: +44 870 134 4371 | E: [email protected] | W: www.marketline.com