Page 265

CASE 3

lululemon athletica’s
Strategy in 2022: Can the
Retailer Continue to Deliver
Growth Despite the
Headwinds?

Arthur A. Thompson
The University of Alabama

Randall D. Harris

Texas A&M University—Corpus Christi

In May 2022, shareholders of lululemon athletica—a designer and retailer of high-

tech athletic apparel sold under the lululemon brand—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 growing the company and boosting its profitability somewhat faster than
his predecessor had done during 2016 and 2017. Since the end of fiscal 2017 on
January 28, 2018, lululemon’s revenues had grown from $2.65 billion to $6.26
billion (a compound growth rate of 24 percent) despite the effects of the COVID-
19 pandemic, and net profits jumped from $258.7 million to $975.3 million (a
compound growth rate of 39.3 percent). The number of company-operated stores
had increased from 404 stores in 12 countries in February 2018 to 574 stores in 17
countries as of April 2022, and the company’s stock price had risen from $120 in
mid-2018 to an all-time high of $477 in November 2021 before slipping back to the
$300 range in early May 2022 (largely due to a big selloff in the stock market
driven by mounting investor concerns about an economywide inflation rate of 8.5
percent—the highest in the United States in over 40 years, consensus expectations
of sharp increases in interest rates stemming from actions of the Federal Reserve to
reduce inflation, and growing fears of an upcoming recession).

In early 2019, McDonald had announced a new five-year “Power of Three” strategic
plan featuring three growth initiatives:
Product Innovation. Using a Science of Feel approach to product development
that utilized high-performance proprietary fabrics and innovative design and
apparel construction techniques, the company would employ a disruptive
innovation strategy to lure customers with apparel having unparalleled feel-good
comfort, fit, and technical performance features. The objective was to rapidly
grow annual apparel sales by offering an appealing stream of innovative new
products and a fresh and expanding lineup of yoga, running, and training
products for both women and men. Page 266
Omni Guest Experiences. The company sought to become “an
experiential brand” and use all of the company’s marketing channels to grow and
deepen its relationship with the guests who patronized its stores and shopped its
website. The vision was to create an expanding digital ecosystem where local
community members striving to live the “sweatlife” and lead a healthy, mindful
lifestyle could connect and come together via attendance at a variety of local
community events, partnerships with local yoga studios and running clubs,
sharing information about fitness and wellness posted by various digital sources,
and further developing unique store formats (like a 25,000-square-foot store in
Chicago which had a yoga studio, meditation space, a healthy food and juice bar,
and areas for community gatherings). Management intended for the company’s
digital ecosystem to become a greater source of information and communication
and a means of inspiring and igniting community building. A little over a year
later in June 2020, lululemon significantly expanded upon its omni guest
experiences concept by acquiring at-home exercise fitness company Mirror.
Mirror offered live exercise classes every day, access to a large library of 10,000+
workouts across 50 fitness categories (such as sculpt, cardio, strength, stretch,
Pilates, Barre, yoga, tai chi, and boxing) conducted by world-class experts, and
one-on-one personal training sessions—all delivered by a wall-mounted smart gym
Mirror device connected to the Internet that Mirror sold for $1,495. Mirror
buyers paid a monthly membership fee for unlimited exercise classes on-demand.
Calvin McDonald believed that COVID-19 would prompt many gym-goers to
pivot to exercise at their homes. At-home workout equipment maker Peloton had
just reported that its sales for the latest quarter had surged 66 percent from a
year earlier to $525 million and that it ended the quarter with a connected
fitness subscriber base of nearly 890,000 people.
Expanded Geographic Coverage. Outside North America, the company’s primary
focus for new store openings would be the People’s Republic of China, with one
to two new company-operated stores to be opened annually in Europe (namely
 Germany, the United Kingdom, France, Ireland, the Netherlands, and Norway),
and in such Asia-Pacific countries as Australia, South Korea, New Zealand,
Japan, Singapore, and Malaysia.

Specific strategic objectives for the 2019 Power of Three initiatives were by 2023 to
grow revenues to $6 billion, double digital revenues, double revenues from sales of
men’s apparel, grow the number of lululemon retail stores in the United States and
internationally, and quadruple revenues outside North America.

When Calvin McDonald reported lululemon’s results for fiscal year 2021 on March
29, 2022, he stated:1
2021 was another successful year for lululemon, which speaks to the enduring
strength of our brand and our ability to deliver sustained growth across the
business. We are proud that we passed the $6 billion in annual revenue milestone
for the first time, and successfully achieved our Power of Three growth target
ahead of schedule. This was especially impressive given the challenging macro
backdrop.

In addition, the company performed well on its other 2023 Power of Three
strategic objectives:
Direct-to-consumer (or digital) sales were $2.78 billion—up 447 percent over
fiscal 2019, and thus far in excess of the amount needed to achieve the 2023
Power of Three target of doubling fiscal 2019 digital sales of $858.9 million.
Digital revenues associated with Omni Guest Experiences grew at compound
average growth rate (CAGR) of 50 percent during the 2020–2021 period.
Sales revenues from men’s apparel were $1.536 billion—22.2 percent above the
amount needed to achieve the 2023 Power of Three target of doubling fiscal
2019 sales of men’s apparel from $690.5 million.
The number of company-operated lululemon retail stores grew from 440 in 14
countries at the end of fiscal 2019 to 491 in 17 countries at the end of fiscal 2020
to 521 in 17 countries at the end of fiscal 2021 to 574 in 17 countries at the end
of fiscal 2022. The number of stores in China grew from 16 at the end of fiscal
 2019 to 86 at the end of fiscal 2022. Of the 53 new stores opened in fiscal 2022,
43 were outside of North America. Page 267
International sales outside North America were $956.7 million, up
266 percent over 2019, but still well short of the $1.44 billion needed to
quadruple the $359.8 million in sales outside of North America in fiscal 2019.
Nonetheless, in fiscal 2022 lululemon achieved a two-year CAGR in
international revenues of 41 percent versus a two-year CAGR of 21 percent in
North American revenues.

Five days after announcing the company’s fiscal 2022 results, Calvin McDonald
outlined a new five-year growth plan and a new Power of Three x2 strategy for
lululemon at the company’s Investor Day session with industry analysts. The
highlights included:
Doubling the company’s revenues to $12.5 billion in five years.
Doubling revenues from the sale of men’s products and delivering double-digit
growth in sales of women’s apparel via continued product and materials
innovation and extending its product lineup to include footwear for men
(women’s footwear was introduced in fiscal 2022) and apparel for tennis, golf,
and hiking.
Doubling digital revenues associated with Guest Experiences, partly by moving
to a monthly membership fee of $39 for unlimited access to the company’s
newly acquired in-home exercise business subsidiary (Mirror) that offered daily
online exercise classes and had a growing library of on-demand workouts and
exercise classes, partnering with such boutique fitness studios as Pure Barre,
Orange Theory, Barrys, JETSWEAT, and Y7 to give Mirror users discounted
access to their online fitness classes, and adding benefits that gave guests more
reasons to engage and connect with lululemon’s products, retail stores, and
digital community. Company research had revealed when guests sweat more they
spend 15 percent more. McDonald’s vision was to pursue ways to create the
most immersive fitness marketplace in the industry.
 Quadrupling international revenues and delivering double-digit sales growth in
North America. McDonald expressed his belief that the company was in the
early innings of growth since its current sales represented only 1 percent of the
total addressable market of $650 billion. Going forward he saw ample
opportunity for the company to attract new guests, grow revenues in its core
product lines, and enter additional geographic markets.

However, there were several headwinds facing lululemon management in April

2022. In-store sales had suffered during the COVID-19 shutdowns around the
world, and the company needed to successfully execute on its efforts to return in-
stores sales to pre-COVID-19 levels and then aggressively grow average store
revenues annually going forward. Global supply chain issues had resulted in
increased costs as well, and it was possible that margins on the company’s
signature products might come under pressure even though the company was
raising the prices of most of its products to recover the increased costs.
Furthermore, new COVID-19 outbreaks had reappeared in Mainland China and
several other countries in February–May 2022, resulting in new shutdowns that
further pressured both lululemon’s store operations and its already tight product
supply chain. The company’s Mirror unit was also experiencing integration issues
and management turnover. It was unclear whether lululemon management could
overcome these headwinds without suffering some setbacks in hitting its aggressive
sales targets for 2022 and beyond.
COMPANY BACKGROUND
A year after selling his eight-store surf-, skate-, and snowboard-apparel chain called
Westbeach Sports, Chip Wilson took the first commercial yoga class offered in
Vancouver, British Columbia, and found the result exhilarating. But he found the
cotton clothing used for sweaty, stretchy power yoga completely inappropriate.
Wilson’s passion was form-fitting performance fabrics, and in 1998 he opened a
design studio for yoga clothing that also served as a yoga studio at night to help pay
the rent. He designed several yoga apparel items made of moisture-wicking fabrics
that were light, form-fitting, and comfortable and asked local yoga instructors to
wear the products and give him feedback. Gratified by the positive response,
Wilson opened lululemon’s first real store in the beach area of Vancouver in
November 2000.
Page 268
While the store featured yoga clothing designed by Chip Wilson and his
wife Shannon, Chip Wilson’s vision was for the store to be a community hub where
people could learn and discuss the physical aspects of healthy living—from yoga
and diet to running and cycling, plus the yoga-related mental aspects of living a
powerful life of possibilities. But the store’s clothing proved so popular that dealing
with customers crowded out the community-based discussions and training about
the merits of living healthy lifestyles. Nonetheless, Chip Wilson and store
personnel were firmly committed to healthy, active lifestyles, and Wilson soon
concluded that for the store to provide staff members with the salaries and
opportunities to experience fulfilling lives, the one-store company needed to expand
into a multistore enterprise. Wilson believed that the increasing number of women
participating in sports, and specifically yoga, provided ample room for expansion,
and he saw an opportunity for lululemon athletica’s yoga-inspired performance
apparel to capitalize on the absence of yoga-specific garments in the women’s
athletic apparel market. Wilson also saw the company’s mission as one of providing
people with the components to live a longer, healthier, and more fun life.
Several new lululemon stores were opened in the Vancouver area, with operations
conducted through a Canadian operating company, initially named lululemon
athletica, Inc. and later renamed lululemon Canada, Inc. In 2002, the company
expanded into the United States and formed a sibling operating company,
lululemon athletica USA Inc. (later renamed as lululemon USA, inc.), to conduct
its operations in the United States. Both operating companies were wholly owned
by affiliates of Chip Wilson. In 2004, the company contracted with a franchisee to
open a store in Australia as a means of more quickly disseminating the lululemon
athletica brand name, conserving on capital expenditures for store expansion
(since the franchisee was responsible for the costs of operating and operating the
store), and boosting revenues and profits. The company wound up its fiscal year
ending January 31, 2005, with 14 company-owned stores, one franchised store, and
net revenues of $40.7 million. A second franchised store was opened in Japan later
in 2005. Franchisees paid lululemon a one-time franchise fee and an ongoing
royalty based on a specified percentage of net revenues; lululemon supplied
franchised stores with garments at a discount to the suggested retail price.

Five years after opening the first retail store, it was apparent that lululemon apparel
was fast becoming something of a cult phenomenon and a status symbol among
yoga fans in areas where lululemon stores had opened. Avid yoga exercisers were
not hesitating to purchase $120 color-coordinated lululemon yoga outfits that felt
comfortable and made them look good. Mall developers and mall operators quickly
learned about lululemon’s success and began actively recruiting lululemon to lease
space for stores in their malls.

In December 2005, with 27 company-owned stores, two franchised stores, and

record sales approaching $85 million annually, Chip Wilson sold 48 percent of his
interest in the company’s capital stock to two private equity investors: Advent
International Corporation, which purchased 38.1 percent of the stock, and
Highland Capital Partners, which purchased a 9.6 percent ownership interest. In
connection with the transaction, the owners formed lululemon athletica inc. to
serve as a holding company for all the company’s related entities, including the two
operating subsidiaries, lululemon Canada Inc. and lululemon USA inc. Robert
Meers, who had 15 years’ experience at Reebok and was Reebok’s CEO from 1996
to 1999, joined lululemon as CEO in December 2005. Chip Wilson headed the
company’s design team and played a central role in developing the company’s
strategy and nurturing the company’s distinctive corporate culture; he was also
chairman of the company’s Board of Directors, a position he had held since
founding the company in 1998. Wilson and Meers assembled a management team
with a mix of retail, design, operations, product sourcing, and marketing experience
from such leading apparel and retail companies as Abercrombie & Fitch, Limited
Brands, Nike, and Reebok.

Brisk expansion ensued. The company ended fiscal 2006 with 41 company-owned
stores, 10 franchised stores, net revenues of $149 million, and net income of $7.7
million. In 2007, the company’s owners elected to take the company public. The
initial public offering took place on August 2, 2007, with the company selling
2,290,909 shares to the public and various stockholders selling 15,909,091 shares
of their personal holdings. Shares began trading on the NASDAQ under the
symbol LULU and on the Toronto Exchange under the symbol LLL.

The company grew rapidly over the next decade. Fitness-conscious women Page 269
began flocking to the company’s stores not only because of the fashionable
products but also because of the store ambience and attentive, knowledgeable store
personnel. Dozens of new lululemon athletica retail stores were opened annually,
and the company pursued a strategy of embellishing its product offerings to create
a comprehensive line of apparel and accessories designed for athletic pursuits such
as yoga; running and general fitness; technical clothing for active female youths;
and a selection of fitness and recreational items for men. Revenues topped $1
billion in fiscal 2011, $2 billion in fiscal 2016, and $3 billion in fiscal 2018.

Sales reached $3.9 billion in fiscal 2019 and continued to grow to $4.4 billion in
fiscal 2020, despite the worldwide COVID-19 pandemic that caused the company
to shut down many of its stores for portions of 2020 and prompted many of the
company’s customers to shift from shopping lululemon’s retail stores to shopping
online at the company’s website (https://shop.lululemon.com) that was accessible
worldwide. In 2020, sales at the company’s retail stores dropped from $2.5 billion
in fiscal 2019 to just under $1.7 billion, while e-commerce sales doubled from $1.14
billion in 2019 to $2.4 billion in 2020. In the company’s most recent fiscal year
ending January 30, 2022, retail store sales accounted for 45 percent of company
revenues of $6.25 billion, direct-to-consumer sales accounted for 44 percent, and
sales in other channels (discount outlets, temporary locations, Mirror, sales to
wholesale accounts, and licensing and supply arrangements) accounted for 11
percent.

Exhibit 1 presents highlights of the company’s performance for fiscal years

2017–2021. Exhibit 2 shows lululemon’s revenues by business segment and
geographic region for the same period.
Page 270
 Financial and Operating Highlights, lululemon athletica, Fiscal
EXHIBIT 1
Years 2017–2021 (Millions of $, except per share data)

Fiscal Fiscal Fiscal Fiscal Fiscal

Year Year Year Year Year
2021 2020 2019 2018 2017

(Ending (Ending (Ending (Ending (Ending

Selected Income Jan. Jan. Feb. 2, Feb. 3, Jan.
Statement Data 30,2022) 31,2021) 2020) 2019) 28,2018)
Net revenues $6,256.6 $4,401.9 $ 3,979.3 $ 3,288.3 $ 2,649.2
Cost of goods sold 2,648.0 1,937.9 1,755.9 1,472.0 1,250.4
Gross profit 3,608.6 2,464.0 2,223.4 1,816.3 1,398.8
Selling, general, and 2,225.0 1,609.0 1,334.3 1,110.5 904.3
administrative
expenses

Operating profit 1,333.4 820.0 889.1 705.8 456.0

Net profit (loss) $ 975.3 $ 588.9 $ 645.6 $ 483.8 $ 258.7

Foreign currency (18.8) 47.4 (7.8) (73.9) 58.6

translation
adjustment
Comprehensive $ 956.6 $ 636.3 $ 637.8 $ 409.9 $ 317.2
income

Earnings per share— $7.52 $4.52 $4.95 $3.63 $1.90

basic
—diluted $7.49 $4.50 $4.93 $3.61 $1.90

Balance Sheet Data

 Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year
2021 2020 2019 2018 2017

(Ending (Ending (Ending (Ending (Ending

Selected Income Jan. Jan. Feb. 2, Feb. 3, Jan.
Statement Data 30,2022) 31,2021) 2020) 2019) 28,2018)
Cash and cash $1,259.9 $1,150.5 $ 1,093.5 $ 881.3 $ 990.5
equivalents
Inventories 966.5 647.3 518.5 404.8 329.6
Total assets 4,942.5 4,185.2 3,281.4 2,084.7 1,998.5

Stockholders’ equity 2,740.0 2,558.6 1,952.2 1,446.0 1,597.0

Cash Flow and
Other Data
Net cash provided by $1,389.1 $ 803.3 $ 669.3 $ 742.8 $ 489.3
operating
activities

Capital expenditures 394.5 229.2 283.1 225.8 157.9

Store Data
Number of corporate- 574 521 491 440 404
owned stores
open at end of
period
Sales per gross $ 1,443 Not $ 1,657 $ 1,579 $ 1,554
square foot at reported*
corporate-owned
stores open at
least one full year
 Fiscal Fiscal Fiscal Fiscal Fiscal
Year Year Year Year Year
2021 2020 2019 2018 2017

(Ending (Ending (Ending (Ending (Ending

Selected Income Jan. Jan. Feb. 2, Feb. 3, Jan.
Statement Data 30,2022) 31,2021) 2020) 2019) 28,2018)
Average sales at Not Not $5.18 $4.78 $4.68
corporate-owned reported* reported* million million million
stores open at
least one year
Source: Company 10-K reports for fiscal years 2017, 2018, 2019, 2020, and 2021.
*These performance metrics were not reported due to temporary store closings and the in-store shopping
restrictions associated with the COVID-19 pandemic in the first two quarters of 2020 and 2021.

Page 271
 lululemon athletica’s Revenues and Income from Operations by
EXHIBIT 2 Business Segment and by Geographical Region, Fiscal Years
2017–2021 (dollars in millions)

Fiscal Fiscal Fiscal Fiscal Fiscal

Year 2021 Year 2020 Year 2019 Year 2018 Year 2017

(Ending (Ending (Ending (Ending (Ending

Revenues by Jan. 30, Jan. 31, Feb. 2, Feb. 3, Jan. 28,
Business Segment 2022) 2021) 2020) 2019) 2018)
Corporate-owned $2,821.5 $1,658.8 $2,501.1 $2,126.4 $1,837.1
stores
Direct-to-consumer 2,777.9 2,284.1 1,137.8 858.9 577.6
(e-commerce sales)

Other* 657.2 459.0 340.4 303.1 234.5

Total $6,256.6 $4,401.9 $3,979.3 $3,288.3 $2,649.2
Percentage
Distribution of
Revenues by
Business Segment
Corporate-owned 45.1% 37.7% 62.9% 64.7% 69.3%
stores
Direct-to-consumer 44.4% 51.8% 28.6% 26.1% 21.8%
(e-commerce sales)
Other* 10.5% 10.4% 8.5% 9.2% 8.9%
Total 100% 99.9% 100.0% 100.0% 100.0%
Income from
Operations (before
 Fiscal Fiscal Fiscal Fiscal Fiscal
Year 2021 Year 2020 Year 2019 Year 2018 Year 2017

(Ending (Ending (Ending (Ending (Ending

Revenues by Jan. 30, Jan. 31, Feb. 2, Feb. 3, Jan. 28,
Business Segment 2022) 2021) 2020) 2019) 2018)
general corporate
expenses), by
Business Segment
Corporate-owned $727.7 $212.6 $689.3 $575.5 $464.3
stores

Direct-to-consumer 1,216.5 1,029.1 482.4 354.1 224.1

(e-commerce sales)
Other* 77.3 10.5 72.6 62.6 35.6
Total Income from $2,021.5 $1,252.2 $1,244.3 $ 992.2 $ 724.0
Operations
Revenues by
Geographic Region

United States $4,345.7 $3,105.1 $2,854.4 $2,363.4 $1,911.8

Canada 954.2 672.6 649.1 565.1 491.8
Outside of North 956.7 624.1 475.8 359.8 245.6
America
Total $6,256.6 $4,401.9 $3,979.3 $3,288.3 $2,649.2
Percentage
Distribution of
Revenues by
Geographic Region
United States 69.46% 70.5% 71.7% 71.9% 72.2%
Canada 15.25% 15.2% 16.3% 17.2% 18.6%
 Fiscal Fiscal Fiscal Fiscal Fiscal
Year 2021 Year 2020 Year 2019 Year 2018 Year 2017

(Ending (Ending (Ending (Ending (Ending

Revenues by Jan. 30, Jan. 31, Feb. 2, Feb. 3, Jan. 28,
Business Segment 2022) 2021) 2020) 2019) 2018)
Outside of North 15.29% 14.2% 12.0% 10.9% 9.2%
America
Total 100% 99.9% 100.0% 100.0% 100.0%
Revenues by
Product Category
Women’s products $4,171.8 $3,049.9 $2,767.8 $2,334.6 $1,892.6
Men’s products 1,535.8 953.2 927.2 690.5 526.5

Other categories 549.0 398.8 284.2 263.2 230.0

Total $6,256.6 $4,401.9 $3,979.3 $3,288.3 $2,649.2
Percentage
Distribution of
Revenues by
Product Category
Women’s products 66.7% 69.3% 69.6% 71.0% 71.4%

Men’s products 24.5% 21.7% 23.3% 21.0% 19.9%

Other categories 8.8% 9.1% 7.1% 8.0% 8.7%
100.0% 100.1% 100.0% 100.0% 100.0%
Source: Company 10-K Reports, Fiscal Years 2017, 2018, 2019, 2020, and 2021.
*The “Other” category included outlets, temporary locations, Mirror, sales to wholesale accounts, and license
and supply arrangements.
lululemon’s Evolving Senior Leadership
Team
In January 2008, Christine M. Day joined the company as executive vice president,
retail operations. Previously, she had worked at Starbucks, functioning in a variety
of capacities and positions, including president of the Asia Pacific Group (July
2004 to February 2007); co-president for Starbucks Coffee International (July
2003 to October 2003); senior vice president, North American Finance &
Administration; and vice president of sales and operations for Business Alliances.
In April 2008, when Chip Wilson decided to relinquish his role as lululemon’s
CEO to become chairman of the Board of Directors and also function as the
company’s chief innovation and branding officer, Christine Day was appointed as
lululemon’s president and chief operating officer. She was named chief executive
officer and mem ber of the Board of Directors in July 2008. During her tenure as
CEO, Day expanded and strengthened the company’s management team to
support its expanding operating activities and geographic scope, favoring the
addition of people with relevant backgrounds and experiences at such companies
as Nike, Abercrombie & Fitch, The Gap, and Speedo International. She also spent
several hours each week in the company’s stores observing how customers
shopped, listening to their comments and complaints, and using the information to
tweak product offerings, merchandising, and store operations.

Company founder Chip Wilson resigned from his position as lululemon’s chief
innovation and branding officer effective January 29, 2012, and moved his family to
Australia; however, he continued on as chairman of the company’s Board of
Directors and focused on becoming a better board chairman, even going so far as
to take a four-day course on board-governance at Northwestern University.2
Christine Day promoted Sheree Waterson, who had joined the company in 2008
and had over 25 years of consumer and retail industry experience, as chief product
officer to assume responsibility for product design, product development, and other
executive tasks that Wilson had been performing. Shortly after quality problems
with lululemon black Luon bottoms (too sheer) occurred, Sheree Waterson
resigned her position and left the company. In October 2013, lululemon announced
that Tara Poseley had been appointed to its senior leadership team as chief product
officer and would have responsibility for overseeing lululemon’s design team,
product design activities, merchandising, inventory activities, and strategic
planning. Previously, Poseley held the position of interim president at Bebe Stores,
Inc., president of Disney Stores North America (The Children’s Place), CEO of
Design Within Reach (DWR), and a range of senior merchandising and design
management positions during her 15-year tenure at Gap Inc.

In the aftermath of the pants recall in March 2013, the working relationship
between Christine Day and Chip Wilson deteriorated. Wilson made it clear that he
would have handled the product recall incident differently and that he did not think
there were problems with the design of the product or the quality of the fabric. But
the differences between Day and Wilson went beyond the events of March 2013,
especially when some consumers began to complain about the quality of the
replacement pants. Wilson returned from Australia in May 2013, and weeks later
Christine Day announced she would step down as CEO when her successor was
named. A lengthy search for Day’s replacement ensued.

In the meantime, Chip Wilson triggered a firestorm when, in an interview Page 272
with Bloomberg TV in November 2013, he defended the company’s design of the
black Luon bottoms, saying, “Quite frankly, some women’s bodies just actually
don’t work” with the pants. Although a few days later he publicly apologized for his
remarks suggesting that the company’s product quality issues back in March 2013
were the fault of overweight women, his apology was not well received. In
December 2013, Wilson resigned his position as chairman of lululemon’s board of
directors and took on the lesser role of nonexecutive chairman. A few months later,
Wilson announced that he intended to give up his position as nonexecutive
chairman prior to the company’s annual stockholders meeting in June 2014 but
continue as a member of the company’s Board of Directors (in 2013—2014, Wilson
was the company’s largest stockholder and controlled 29.2 percent of the
company’s common stock).

In early December 2013, lululemon announced that its Board of Directors had
appointed Laurent Potdevin as the company’s chief executive officer and a member
of its Board of Directors; Potdevin stepped into his role in January 2014. Potdevin
came to lululemon having most recently served as president of TOMS Shoes; a
company founded on the mission that it would match every pair of shoes
purchased with a pair of new shoes given to a child in need. Prior to TOMS, he
held numerous positions at Burton Snowboards for more than 15 years, including
president and CEO from 2005 to 2010; Burton Snowboards, headquartered in
Burlington, Vermont, was considered to be the world’s premier snowboard
company, with a product line that included snowboards and accessories (bindings,
boots, socks, gloves, mitts, and beanies); men’s, women’s, and youth snowboarding
apparel; and bags and luggage. Burton’s grew significantly under Potdevin’s
leadership, expanding across product categories and opening additional retail
stores.

Tension between Chip Wilson and lululemon’s board of directors erupted at the
company’s annual shareholders’ meeting in June 2014 when he voted his entire
shares against re-election of the company’s chairman and another director. In
February 2015, after continuing to disagree with lululemon executives and board
members over the company’s strategic direction and ongoing dissatisfaction with
how certain lululemon activities were being managed, Wilson resigned his position
on lululemon’s board of directors. In August 2014, he sold half of his ownership
stake to a private equity firm. In June 2015, lululemon filed documents with the
Securities and Exchange Commission enabling Wilson to sell his remaining 20.1
million shares (equal to a 14.6 percent ownership stake worth about $1.3 billion) in
the event he wished to do so. As of April 2022, Chip Wilson was lululemon’s
second largest stockholder, with 10.7 million shares equal to an ownership stake of
about 8.6 percent.
In 2018, lululemon CEO Laurent Potdevin resigned as CEO following allegations
of misconduct; he was replaced by Calvin McDonald as chief executive officer
effective August 2018. McDonald had previously served for five years as the
president and CEO of Sephora America, a division of the LVMH Group. Mr.
McDonald had been very successful in his previous position, a period during which
Sephora America grew annually by double digits. McDonald was also an
endurance athlete who had competed in both triathlons and marathons.3 In April
2020, the chief financial officer (CFO) for lululemon, Patrick Guido, resigned as
CFO. Patrick Guido was replaced by Ms. Meghan Frank, who served as interim co-
CFO from April 2020 to November 2020, and was appointed CFO for lululemon
in November 2020.
Page 273
Exhibit 3 presents the executive officers of lululemon athletica as of
April 2022.
EXHIBIT 3 Executive Officers, lululemon athletica, April 2022

Name Title Brief Biography

Calvin Chief Executive Joined lululemon in August 2018. Prior to joining
McDonald Officer lululemon, he served for five years as president and
CEO of Sephora Americas, a division of the LVMH
group of luxury brands. Before that, he was CEO of
Sears Canada for 2 years and spent 17 years at Loblaw
Companies Limited, a grocery and pharmacy leader in
Canada. He was on the board of directors of lululemon
and The Walt Disney Company. McDonald had an MBA
from University of Toronto and a Bachelor of Science
degree from the University of Western Ontario.

Michael Chief Executive Joined lululemon in January 2022. Previously at

Aragon Officer of Mirror Amazon, where he was chief content officer at Twitch.
and lululemon Also served as general manager VRV at Ellation, Inc.
Digital Fitness and spent more than 10 years at Sony where he
expanded the PlayStation Network beyond gaming
and into more than 30 countries. Earned an MBA from
Tuck School of Business, Dartmouth College.
Julie Averill Executive Vice Joined lululemon in 2017. Previously worked at REI,
President and where she was the first-ever chief information officer,
Chief and spent more than a decade at Nordstrom where
Technology she held several key positions on its IT leadership
Officer team. MBA from the University of Washington.
Celeste President, Joined lululemon in 2006 and was previously general
Burgoyne Americas, and manager of U.S. Operations, among other roles.
Global Guest Started career at Abercrombie & Fitch. BA degree from
Innovation the University of San Diego.
 Name Title Brief Biography
Sun Choe Chief Product Joined lululemon in 2016. Prior to lululemon, served as
Officer chief global product merchant at Marc Jacobs. Also
worked at Urban Outfitters, Levi’s, and The Gap. BA
degree from University of Maryland, College Park.
Ted Chief Supply Joined lululemon in 2016. Prior to lululemon, served as
Dagnese Chain Officer vice president, supply chain at VF Corporation. MS in
Engineering Economics from Northeastern University.
Meghan Chief Financial Joined lululemon in 2016. Interim co-CFO from April
Frank Officer 2020 until appointment as CFO in November 2020.
Previously held senior finance and merchandise
planning roles at Ross Stores and J. Crew. BA in
Economics from Colgate University.
Susan Senior Vice Ms. Gelinas joined lululemon in 2011. Prior to joining
Gelinas President, the company, she was a senior consultant at Towers
People & Watson.
Culture
Shannon Senior Vice Ms. Higginson joined lululemon in 2011. Prior to joining
Higginson President, the company, she served as senior counsel for
General Canadian telecommunications company TELUS. Holds
Counsel & Chief a J.D. degree from the University of Victoria.
Compliance
Officer
André Executive Vice Joined lululemon in January 2021. Prior to lululemon,
Maestrini President, spent 14 years at adidas in various senior roles. Also
International held marketing roles at the Coca-Cola Company and
Danone. Master’s degree in Marketing from ESSEC in
Paris, France.
Nikki Chief Brand Ms. Neuberger joined lululemon in 2020. Prior to
Neuberger Officer lululemon, served as global head of marketing for Uber
 Name Title Brief Biography
Eats. Also spent 14 years at Nike, where she served as
global vice president of Nike Running. BS in Business
Administration from Oregon State University.
Source: Information posted at www.corporate.lululemon.com, accessed May 2, 2022.
THE YOGA MARKETPLACE
The origins of yoga are obscure but was generally considered to have been
developed in Northern India at least 5,000 years ago.4 Yoga arrived in the United
States in 1893 through a series of lectures given by Swami Vivekananda in Chicago,
Illinois.5 The number of yoga participants had grown rapidly in the United States,
with an estimated 55 million people in 2020 who had practiced yoga in the last six
months in a group or private class setting,6 up from 36.7 million in 2015 and 20.4
million in 2012.7 Yoga practitioners enrolled in yoga classes for a number of
different reasons, including improving flexibility, reducing stress, improving sleep,
and improving health and physical fitness.8 In a 2016 survey, 42 percent of survey
respondents agreed with the statement that “Yoga increases my personal well-
being” and 41 percent of survey respondents agreed with the statement that “Yoga
helps me find inner peace.”9

Worldwide, it was estimated that there were about 300 million yoga Page 274

practitioners.10 About 72 percent of the people who engaged in group or class yoga
exercises were women; 30- to 49-year-olds were the most active age group (43
percent), followed by 50+-year-olds (38 percent) and 19- to 29-year-olds (19
percent), and close to 62 percent of all yoga practitioners were in the age range of
18–49.11 The level of yoga expertise varied considerably: 56 percent of yoga
practitioners considered themselves as beginners, 42 percent considered
themselves as “intermediate,” and 2 percent considered themselves to be in the
expert/advanced category. Worldwide, the annual spend on yoga classes, clothing,
equipment, and accessories in the yoga industry was estimated to be $80 billion,
with spending in the United States an estimated $16 billion.12 Those aged between
25 and 34 spent the most on activewear, including yoga clothing. U.S. yoga
industry revenue was estimated to be $11.56 billion in 2020.13 Apart from in-
person yoga classes, 24 percent of people were estimated to use yoga apps or yoga-
guided videos as part of their yoga routines.14 There were currently about 7,000
registered yoga studios in the United States, and more than 100,000 yoga teachers
registered with the Yoga Alliance.15
The market for sports and fitness apparel was considerably larger, of course, than
just the market for yoga apparel. The global market for all types of sportswear,
activewear, and athletic apparel was estimated to be about $250 billion in 2020 and
was forecast to grow at roughly 5 percent annually through 2026.16 Sales of various
types of sports apparel was among the fastest-growing segments in the $3 trillion
global apparel market. In the United States, sales of activewear and all types of gym
and fitness apparel, which included both items made with high-tech performance
fabrics that wicked away moisture and had other high-performance features were
the fastest growing segment of the sports apparel industry.17
lululemon’s Business and Strategy in 2022
In its 2021 10-K report, the company described its vision and business purpose as
follows:
lululemon athletica inc. is principally a designer, distributor, and retailer of
healthy lifestyle inspired athletic apparel and accessories. We have a vision to be
the experiential brand that ignites a community of people through sweat, grow,
and connect, which we call “living the sweatlife.” Since our inception, we have
fostered a distinctive corporate culture; we promote a set of core values in our
business which include taking personal responsibility, nurturing entrepreneurial
spirit, acting with honesty and courage, valuing connection and inclusion, and
choosing to have fun. These core values attract passionate and motivated
employees who are driven to achieve personal and professional goals and share
our purpose “to elevate the world by realizing the full potential within every one
of us.”18

The company elaborated further on its business:19

Our guests seek a combination of performance, style, and sensation in their
athletic apparel, choosing products that allow them to feel great however they
exercise. Since consumer purchase decisions are driven by both an actual need
for functional products and a desire to live a particular lifestyle, we believe the
credibility of our brand and the authentic community experiences we offer
expand our potential market beyond just athletes to those who pursue an active,
mindful, and balanced life.
Although our largest customer group is made up of guests who shop our
women’s range, representing 67% of our 2021 net revenue, we also design a
comprehensive men’s line and have a targeted strategy in place. Revenue from
men’s range is growing as more guests discover the technical rigor and premium
quality of our men’s products and are attracted by our distinctive brand.
We primarily conduct our business through two channels: company-operated
stores and direct to consumer.

Page 275
Product Line Strategy
In 2022, lululemon offered a diverse and growing selection of premium-priced
performance apparel and accessories for women, female youths, and men that were
designed for healthy lifestyle activities such as yoga, swimming, running, cycling,
and general fitness. The company’s range of product offerings in 2022 are
presented in Exhibit 4.
 A Representative Sample of lululemon athletica’s Product
EXHIBIT 4
Offerings for Women and Men, 2022

Women Men

Leggings Swimsuits Joggers

Coats & Tank Tops Hoodies & Sweatshirts

Jackets

Dresses Underwear Pants

Joggers Footwear Polo Shirts

Shirts Gloves & Mittens Shorts

Pants Hats Swim Trunks

Shorts Scarves & Wraps Trousers

Sports Bras Water Bottles Footwear

Sweaters Yoga Mats & Yoga Mats &

Accessories Accessories
lululemon’s Strategy of Offering Only a Limited Range
of Apparel Sizes
In the months following the product recall of the too-sheer bottom pants in March
2013, lululemon officially revealed in a posting on its Facebook page that it did not
offer clothing in plus-sizes because focusing on sizes 12 and below was an integral
part of its business strategy; according to the company’s posting and to the
postings of lululemon personnel who responded to comments made by Facebook
members who read the lululemon posting:20
Our product and design strategy are built around creating products for our target
guest in our size range of 2–12. While we know that doesn’t work for everyone
and recognize fitness and health come in all shapes and sizes, we’ve built our
business, brand, and relationship with our guests on this formula.
We agree that a beautiful healthy life is not measured by the size you wear. We
want to be excellent at what we do, so this means that we can’t be everything to
everybody and need to focus on specific areas. Our current focuses are in
innovating our women’s design, men’s brand, and building our international
market.
At this time, we don’t have plans to change our current sizing structure which is
2–12 for women.

In 2016, the largest size appearing in the size guide for women on lululemon’s
website was 12, which was said to be suitable for a 40” bust, 32.5” waist, and 43”
hips. However, in 2022, the size range had been expanded, with 20 being the
largest women’s size appearing on the company’s website. Some women’s products
in 2022 were offered in sizes ranging from XXXS to XXL, but most website
products were sized XS to XL.
lululemon’s Entry into the Athletic Footwear Segment
On March 8, 2022, lululemon CEO Calvin McDonald announced the company
was entering the athletic footwear market.21 Its first product, Blissfeel, was a
women’s running shoe line, which became available in late March 2022. Additional
styles, including Chargefeel (cross-training), Restfeel (postworkout), and Strongfeel
(athletic training), were scheduled for release later in the year. A men’s footwear
collection was scheduled for rollout in 2023.22 According to McDonald, “Each
shoe within the lululemon footwear collection is designed to deliver a specific
feeling … and to help ensure a zero-distraction experience for guests enjoying the
right fit from the first trial.”23
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Company-Operated Stores and Store
Expansion Strategy
After several years of experience in establishing and working with franchised stores
in the United States, Australia, Japan, and Canada, top management in 2010
determined that having franchised stores was not in lululemon’s best long-term
strategic interests. A strategic initiative was begun to either acquire the current
stores of franchisees and operate them as company stores or convert the franchised
stores to a joint venture arrangement where lululemon owned the controlling
interest in the store and the former franchisee owned a minority interest. By year-
end 2011, all lululemon stores were company operated.

As of April 2022, lululemon had 574 company-operated stores in 17 countries:

324 stores in the United States.
63 stores in Canada.
86 stores in the People’s Republic of China, inclusive of nine stores in Hong
Kong, two stores in Macau, and five stores in Taiwan.
31 stores in Australia.
17 stores in the United Kingdom.
12 stores in South Korea, nine stores in Germany, seven stores in New Zealand,
six stores in Japan, six stores in Singapore, three stores in France, two stores in
Malaysia, two stores in Sweden, and one store in each of the Netherlands,
Norway, and Switzerland.

For fiscal year 2022, management had announced plans to open a net of 70 new
stores, including 40 in international markets (primarily Asia and its first stores in
Spain, Italy, and Thailand) and 30 in the United States. Management reported that
the company’s real estate strategy going forward would be to focus on (1) the
opening of new company-operated stores, and (2) expansion of the company’s
overall retail square footage through store expansions and store relocations.24
Management saw Greater China as being the company’s biggest growth
opportunity, where the number of yoga studios had tripled from about 14,000 in
2016 to approximately 42,000 in 2021 and where the size of the yoga market was
expected to grow about 12 percent and reach sales of $7.9 billion in 2022, of which
about 59 percent would be spent on yoga classes and 41 percent on apparel,
equipment, and accessories.25

While lululemon reported that fiscal 2021 sales per gross square foot in its
company-owned retail stores were $1,443, management did not believe that this
metric sales revenues per square foot of retail space was useful in evaluating the
performance of their company-operated stores in fiscal 2021 due to the adverse
impact of pandemic-related store closures and mask mandates that temporarily had
curtailed in-store shopping traffic. Sales per gross square foot at corporate-owned
stores open at least one full year had exceeded $1,500 per square foot in fiscal years
2017, 2018, and 2019 (see Exhibit 1). However, by way of comparison, the
stores of specialty fashion retailers like Old Navy, Banana Republic, The Gap, and
Abercrombie & Fitch historically had annual sales averaging less than $500 per
square foot of store space.
lululemon’s Retail Stores: Locations, Layout, and
Merchandising
The company’s retail stores were located primarily on street locations, in upscale
strip shopping centers, in lifestyle centers, and in malls. Typically, stores were
leased and ranged from 2,500 to 3,500 square feet in size. Most stores included
space for product display and merchandising, checkout, fitting rooms, a restroom,
and an office/storage area. While the leased nature of the store spaces meant that
each store had its own customized layout and arrangement of fixtures and displays,
each store was carefully decorated and laid out in a manner that projected the
ambience and feel of a homespun local apparel boutique rather than the more
impersonal, cookie-cutter atmosphere of many apparel-chain stores.

The company’s merchandising strategy was to sell all items in its retail stores at full
price.26 Special colors and seasonal items were in stores for only a limited time—
such products were on 3-, 6-, or 12-week life cycles so that frequent shoppers could
always find something new. Store inventories of short-cycle products were
deliberately limited to help foster a sense of scarcity, condition customers to buy
when they saw an item rather than wait, and avoid any need to discount unsold
items. In one instance, a hot-pink color that launched in December was supposed
to have a two-month shelf life, but supplies sold out in the first week. However,
supplies of core products that did not change much from season to season were
more ample to minimize the risk of lost sales due to items being out-of-stock.
Approximately 95 percent of the merchandise in lululemon stores was sold at full
price.27 When certain styles, colors, and sizes of apparel items at lululemon retail
stores were selling too slowly to clear out the inventories of items ordered from
contract manufacturers, lululemon typically shipped the excess inventories to one
or more of the 37 lululemon Factory Outlet stores to be sold at discounted prices.
Page 277
One unique feature of lululemon’s retail stores was that the floor space
allocated to merchandising displays and customer shopping could be sufficiently
cleared to enable the store to hold an in-store yoga class before or after regular
shopping hours. Every store hosted a complimentary yoga class each week that was
conducted by a professional yoga instructor from the local community who had
been recruited to be a “store ambassador.” When the class concluded, the
attendees were given a 15 percent off coupon to use in shopping for products in the
store. From time to time, each store’s yoga ambassadors demonstrated their moves
in the store windows and on the sales floor. However, these classes were canceled
when the COVID-19 pandemic began and had not been reinstituted as of May
2022. Instead, the company was actively promoting the availability and use of its
online exercise classes delivered by Mirror.
lululemon’s New Trade-In and Buy Like New
Program
In April 2022, following a successful pilot test across 80+ stores in Texas and
California in 2021 that met enthusiastic customer response, lululemon announced
that the company’s first trade-in and resale program “lululemon Like New” would
be available to guests in 390+ participating stores in the United States and online—
trade-ins were not accepted at lululemon factory outlet stores. Store guests could
bring in “gently used” lululemon pants, tops, shorts, jackets, and other items to any
U.S. store, trade them in for amounts ranging from $5 to $25 per item, and receive
an e-gift card (or credit) that could be used to shop resale products online at
www.likenew.lululemon.com or to purchase new lululemon gear at stores or online.
New trade-in items were added for resale daily at the Like New section of
lululemon’s website. Examples of the prices of used items included men’s slim-fit
pants priced from $65 to $75, which sold new for $128, women’s Align high-rise
shorts with pockets priced at $39, which sold new for $68, women’s Wunder Puff
wool jacket priced at $199, which sold new for $398, women’s Rest Less Pullover
priced at $59, which sold new for $88, and women’s Oh So Sherpa Jacket priced at
$99, which sold new for $168—resale prices varied according to whether the item
was in “good-as-new” condition or “gently used.” The company had not ruled out
selling secondhand items in a section of its retail stores; management believed the
new trade-in and resale program would help attract customers looking for deals. A
lululemon executive said “The guest who’s buying from Like New really … skews
younger and is a value-based shopper.”28 The company said its lululemon‘s Like
New program would reinvest 100 percent of the program’s profits to support the
brand’s commitments, which included giving all of its guests the option to repair
and/or recycle its products and making all of its products with sustainable
materials and end-of-use solutions by 2025.
Direct-to-Consumer Sales and Strategy
Direct-to-consumer sales was an integral part of lululemon’s Omni Guest
Experience. As part of the company’s 2019 Power of Three and 2022 Power of
Three x2 strategic growth plans, the company was committed to doubling its digital
revenue by 2023 and doubling such revenues again by 2026. The company
launched its e-commerce website, https://shop.lululemon.com/, in 2009. In 2021–
2022, the company used its e-commerce website, other country and region-specific
websites, and mobile app to enable customers to make online purchases, enable in-
store shoppers to make purchases that could be fulfilled via inventories at other
retail locations or the company’s distribution centers, and extend the company’s
geographic market reach. Management saw online sales as having three strategic
benefits: (1) providing added convenience for core customers, (2) securing sales in
geographic markets where there were no lululemon stores, and (3) helping build
brand awareness, especially in new markets, especially those outside of North
America. As of April 2022, the company website reached six continents and 78
separate countries in North America, South America, Africa, Asia, Europe, and
the Middle East. lululemon processed and shipped online orders within four
business days of the order date and provided free standard shipping (two- to six-
business-day delivery) to all lululemon customers in North America—customers
could upgrade to express shipping for a fee of $20 (three to four business days) or
to priority shipping for a fee of $30 (two to three business days); buyers outside
North America paid a standard $30 shipping fee, with delivery in 5 to 10 business
days after the package was shipped.

The merchandise selection that lululemon offered to online buyers differed Page 278
somewhat from what was available in the company’s retail stores. Several of the
items available in stores were not sold online; a few online selections were not
available in the stores. Styles and colors available for sale online were updated
weekly. On occasion, the company marked down the prices of some styles and
colors sold online to help clear out the inventories of items soon to be out-of-
season and make way for newly arriving merchandise—online customers could view
the discounted merchandise by clicking on a “we made too much” link.

In addition to making purchases, website visitors could browse information about

what yoga was, what the various types of yoga were, and their benefits; learn about
fabrics and technologies used in lululemon’s products; read recent posts on
lululemon’s yoga blog; and stay abreast of lululemon activities in their
communities. The company planned to continue to develop and enhance its e-
commerce website in ways that would provide a distinctive online shopping
experience and strengthen its brand reputation.

Direct-to-consumer sales at the company’s websites had grown dramatically, with e-

commerce sales climbing from $106.3 million in fiscal 2011 (10.6 percent of total
net revenues) to $2.77 billion in fiscal 2021 (44.0 percent of total revenues)—equal
to a compound annual growth rate (CAGR) of 38.6 percent. In 2020 and 2021,
when the majority of lululemon’s retail stores in North America and elsewhere
were closed for two to three months or longer due to COVID-19, e-commerce
became a vital link between the company and its customers. Exhibit 5 shows
the growth in quarterly e-commerce sales for fiscal years 2018 through 2021. E-
commerce sales were expected to grow about 15 percent in fiscal 2022.
 lululemon’s Quarterly E-commerce Sales, Q1 2018 through Q4
EXHIBIT 5
2021

Online Sales Quarter 1 Quarter 2 Quarter 3 Quarter 4

2018 $157.8 million $167.4 million $189.4 million $ 344.2 million

2019 209.8 million 217.6 million 246.7 million 463.7 million

2020 352.0 million 554.3 million 478.3 million 899.5 million

2021 545.1 million 597.4 million 586.5 million 1,000.0 million

Source: Quarterly Financial Results, posted in the Investor Relations section at www.lululemon.com.
Other Company Segments
lululemon also engaged in several other company operations, discussed below.

Outlets and Warehouse Sales—The company operated factory outlet stores and
used physical warehouse sales to sell slow-moving inventory and inventory from
prior seasons at discounted prices.29 In 2022, lululemon operated 37 factory
outlet locations, with most of them located in North America.

Temporary Locations—lululemon’s Showroom Strategy. Over the years, lululemon

had opened “showrooms” in numerous locations both inside and outside North
America as a means of introducing the lululemon brand and culture to a
community, developing relationships with local fitness instructors and fitness
enthusiasts, and hosting community-related fitness events, all in preparation for
the grand opening of a new lululemon athletica retail store in weeks ahead.
Showroom personnel:
Page 279
Hosted get-acquainted parties for fitness instructors and
fitness enthusiasts.

Recruited a few well-regarded fitness instructors in the local area to be

“store ambassadors” for lululemon products and periodically conduct in-
store yoga classes when the local lululemon retail store opened.

Advised people visiting the showroom on where to find great yoga or

Pilates classes, fitness centers, and health and wellness information and
events.

Solicited a select number of local yoga studios, health clubs, and fitness
centers to stock and retail a small assortment of lululemon’s products.
Showrooms were only open part of the week so that showroom
personnel could be out in the community meeting people, building
relationships with yoga and fitness instructors, participating in local yoga
and fitness classes, and talking with attendees before and after class,
 promoting attendance at local fitness and wellness events, and
stimulating interest in the soon-to-open retail store. lululemon used
showrooms as a means of “pre-seeding” the opening of a lululemon retail
store primarily in those locations where no other lululemon retail stores
were nearby.

Mirror—The Mirror division was acquired by lululemon in July 2020. Described

as the “perfect package to transform your home into a complete home gym,”
Mirror was an in-home fitness package that used an interactive workout
platform, or Mirror, to allow guests to subscribe to live and on-demand classes.30
The Mirror Basic package sold for $1,495 on the lululemon website in 2022 and
required a $39/month subscription fee with a one-year minimum commitment.
On May 1, 2022, Mirror began a sales promotion campaign to spur sales of its
Mirror device by offering off-price discounts of $500 to $550 (which included
free shipping and installation) through May 9. Mirror was positioned to
complement the company’s Omni Guest Experience, and specifically to capture
the at-home yoga and fitness enthusiast; lululemon expected that as many as 80
percent of its customers would eventually subscribe to Mirror’s live and on-
demand exercise classes.31
Acquired for $426.5 million in July 2020, the unit quickly ran into trouble. The
original Mirror CEO, Brynn Putnam, stepped down in September 2021.32
Revenues dropped at the Mirror unit in 2021, and company earnings were
impaired by $26.7 million in fiscal 2020 and $40 million in fiscal 2021 due to the
Mirror acquisition.33 Michael Aragon was named CEO of Mirror in January
2022.34

Wholesale Accounts—lululemon also marketed its products to select premium

yoga studios, health clubs, and fitness centers to gain the implicit endorsement
of local fitness personnel for lululemon branded apparel, familiarize their
customers with the lululemon brand, and give them an opportunity to
conveniently purchase lululemon apparel. lululemon management did not want
 to grow wholesale sales to these types of establishments into a significant
revenue contributor. Rather, the strategic objective of selling lululemon apparel
to yoga studios, health clubs, and fitness centers was to build brand awareness,
especially in new geographic markets both in North America and other
international locations where the company intended to open new stores.

License and Supply Arrangements—lululemon had entered license and supply

arrangements with partners in the Middle East and Mexico to operate lululemon
athletica branded retail locations in the United Arab Emirates, Kuwait, Qatar,
Oman, Bahrain, and Mexico. lululemon retained the rights to sell lululemon
products through their e-commerce websites in these countries. Under the
arrangement, lululemon supplied their partners with lululemon products,
training, and other support. As of January 2022, there were six licensed retail
locations in Mexico, six in the United Arab Emirates, one in Kuwait and one in
Qatar, none of which are included in the company-operated store numbers in
Exhibit 1.

Taken together, the company’s other operations accounted for $657 million in net
revenues, or 11 percent of total net revenues in fiscal 2021, versus $459 million and
10 percent of net revenues in fiscal 2020.
Page 280
Company Operations and Culture

Product Design and Development Strategy

lululemon’s product design and development efforts were led by a team of
researchers, scientists, engineers, and designers. The design team included athletes
and users of the company’s products who embraced lululemon’s design philosophy
and dedication to premium quality. Design team members regularly visited retail
stores in a proactive effort to solicit feedback on existing products from store
customers and fitness ambassadors and to gather their ideas for product
improvements and new products. In addition, the design team used various market
intelligence sources to identify and track market trends. The design team
incorporated all this input to make fabric selections, develop new products, and
adjust the fit, style, and function of existing products.

The design team worked closely with its apparel manufacturers to incorporate
innovative fabrics that gave lululemon garments such characteristics as stretch
ability, moisture-wicking capability, color fastness, feel-good comfort, and
durability. Fabric quality was evaluated via actual wear tests and by a leading
testing facility. lululemon partnered with independent inspection, verification, and
testing companies who conducted a battery of tests on fabrics for such
performance characteristics as pilling, shrinkage, abrasion resistance, and
colorfastness. Lastly, lululemon design personnel worked with leading fabric
suppliers to develop proprietary fabrics and collaborated with fabric and trim
suppliers to manufacture fabrics and trims that lululemon could protect through
trademarks, agreements, and trade secrets and thereby gain added brand
recognition and brand differentiation.

Where appropriate, product designs incorporated convenience features, such as

pockets to hold credit cards, keys, digital audio players, clips for heart rate
monitors, and long sleeves that covered the hands for cold weather exercising.
Product specifications called for the use of advanced sewing techniques, such as
flat seaming, which increased comfort and functionality, reduced chafing and skin
irritation, and strengthened important seams. All of these design elements and
fabric technologies were factors that management believed enabled lululemon to
price its high-quality technical athletic apparel at prices above those of traditional
athletic apparel.

Typically, it took 8 to 10 months for lululemon products to move from the design
stage to availability in its retail stores; however, the company had the capability to
bring select new products to market in as little as two months. Management
believed its lead times were shorter than those of most apparel brands due to the
company’s streamlined design and development process, the real-time input
received from customers and ambassadors at its store locations, and the short
times it took to receive and approve samples from manufacturing suppliers. Short
lead times facilitated quick responses to emerging trends or shifting market
conditions. lululemon management believed that its product design and
development process enhanced the company’s capabilities to develop top quality
products and was a competitive strength.
Sourcing and Manufacturing
Production was the only value chain activity that lululemon did not perform
internally. lululemon did not own or operate any manufacturing facilities to
produce fabrics or make garments. In 2021, fabrics were sourced from a group of
approximately 65 fabric manufacturers, with five fabric manufacturers supplying 56
percent of the total and the largest single fabric manufacturer supplying 27 percent
of the fabric the company utilized. During fiscal year 2021, approximately 48
percent of the required fabrics were sourced from suppliers in Taiwan, 19 percent
from suppliers in mainland China, 11 percent from manufacturers in Sri Lanka,
and the remainder from other regions. Other raw materials used in lululemon
products, such as content labels, elastics, buttons, clasps, and drawcords, were
obtained from suppliers located predominantly in the Asia-Pacific region.

Garments were sourced from approximately 41 contract manufacturers, five of

which produced approximately 57 percent of the company’s products in fiscal 2021,
with the largest of these producing about 15 percent of the total. During fiscal
2021, approximately 40 percent of the company’s products were produced in
Vietnam, 17 percent in Cambodia, 11 percent in Sri Lanka, 5 percent in Mainland
China, 2 percent in Taiwan, and the remaining 25 percent in other countries. The
company deliberately refrained from entering into long-term contracts with any of
its fabric suppliers or manufacturing sources, preferring instead to transact
business on an order-by-order basis and rely on the close working relationships it
had developed with its various suppliers over the years. lululemon maintained
production relationships with several manufacturers in North America that
provided the company with the capability to speed select products to market and
respond quickly to changing trends and unexpectedly high buyer demand for
certain products.
Page 281
lululemon took great care to ensure that its manufacturing suppliers
shared lululemon’s commitment to quality and ethical business conduct. All
manufacturers were required to adhere to a vendor code of ethics regarding quality
of manufacturing, safe and healthy working conditions, operation of a respectful
and inclusive workplace, environmental stewardship, fair wage practices, fair
dealings and avoidance of corruption, and compliance with child labor laws,
among others. Vendors were required to post lululemon’s code of ethics in the
language of employees in all major workplaces and dormitories and train their
employees on its contents. lululemon utilized the services of a leading inspection
and verification firm to closely monitor each supplier’s compliance with applicable
law, lululemon’s vendor code of ethics, and other business practices that could
reflect badly on lululemon’s choice of suppliers.
Distribution Facilities
lululemon shipped products to its stores from owned or leased distribution facilities
in the United States and Canada. The company owned a 310,000 square-foot
distribution center in Columbus, Ohio, and leased four additional distribution
centers. The company leased two distribution centers in Toronto, Ontario (one
250,000 square feet and one 255,000 square feet) and had one leased distribution
center in Delta, British Columbia (155,000 square feet) and one leased distribution
center in Sumner, Washington (150,000 square feet). lululemon also entered into
new lease agreements in 2021 for two additional distribution centers, one in Delta,
British Columbia and one in Los Angeles, California. Both new distribution
centers were expected to be opened for business in fiscal 2022.

Third-party logistics providers in China and the Netherlands were used to

warehouse and distribute finished products from the company’s distribution
centers to supply the company’s retail stores in China and Europe. Merchandise
was typically shipped to retail stores through third-party delivery services multiple
times per week, thus providing stores with a steady flow of new inventory.
lululemon’s Community-Based Marketing
Approach and Brand-Building Strategy
One of lululemon’s differentiating characteristics was its community-based
approach to building brand awareness and customer loyalty. It pursued a
multifaceted approach that included leveraging its local store personnel and local
ambassadors, digital marketing and social media, in-store community boards, and a
variety of local grassroots activities, all complemented and amplified by its global
brand-building efforts. Each store recruited local fitness practitioners to be brand
ambassadors. Ambassadors introduced their fitness class attendees to the
lululemon brand and sometimes marketed lululemon products in their studios,
which led to interest in the brand, store visits, and word-of-mouth marketing. Prior
to the COVID-19 pandemic, each yoga-instructor ambassador was also called upon
to conduct a complimentary yoga class every four to six weeks at the local
lululemon store they were affiliated with. In return for helping drive business to
lululemon stores and conducting classes, ambassadors were periodically given bags
of free products, and large portraits of each ambassador wearing lululemon
products and engaging in physical activity at a local landmark were prominently
displayed on the walls of their local lululemon store as a means of helping
ambassadors expand their clientele.

Every lululemon store had a dedicated community coordinator who developed a

customized plan for organizing, sponsoring, and participating in local athletic,
fitness, and philanthropic events. In addition, each store had a community events
bulletin board for posting announcements of upcoming activities, providing fitness
education information and brochures, and promoting the local yoga studios and
fitness centers of ambassadors. There was also a chalkboard in each store’s fitting
room area where customers could scribble comments about lululemon products,
their yoga class experiences, or their appreciation of the assistance/service
provided by certain store personnel; these comments were relayed to lululemon
headquarters every two weeks.
lululemon made little use of traditional print or television advertisements, Page 282
preferring instead to rely on its various grassroots, community-based
marketing efforts and the use of social media (like Facebook and Twitter) to
increase brand awareness, reinforce its premium brand image, and broaden the
appeal of its products.
Store Personnel
As part of the company’s commitment to providing customers with an inviting and
educational store environment, lululemon’s store sales associates, who the
company referred to as “educators,” were coached to personally engage and
connect with each guest who entered the store. Educators, many of whom had
prior experience as a fitness practitioner or were avid runners or yoga enthusiasts,
received approximately 30 hours of in-house training within the first three months
of their employment. Training was focused on (1) teaching educators about leading
a healthy and balanced life, exercising self-responsibility, and setting lifestyle goals,
(2) preparing them to explain the technical and innovative design aspects of all
lululemon products, and (3) providing the information needed for educators to
serve as knowledgeable references for customers seeking information on fitness
classes, instructors, and events in the community. New hires that lacked knowledge
about the intricacies of yoga were given subsidies to attend yoga classes so they
could understand the activity and better explain the benefits of lululemon’s yoga
apparel.

People who shopped at lululemon stores were called “guests,” and store personnel
were expected to “educate” guests about lululemon apparel, not sell to them. To
provide a personalized, welcoming, and relaxed experience, store educators
referred to their guests on a first name basis in the fitting and changing area,
allowed them to use store restrooms, and offered them complimentary fresh-filtered
water. Management believed that such a soft-sell, customer-centric environment
encouraged product trial, purchases, and repeat visits.
Core Values and Culture
lululemon’s stated purpose was “ … to elevate the world by realizing the full
potential in every one of us.”35 lululemon executives sought to promote and ingrain
a set of core values centered on developing the highest-quality products, operating
with integrity and inclusion, leading a healthy balanced life, and instilling in its
employees a sense of self-responsibility and the value of goal-setting. The company
sought to provide employees with a supportive and goal-oriented work
environment; all employees were encouraged to set goals aimed at reaching their
full professional, health, and personal potential. The company offered personal
development workshops and goal-coaching to assist employees in achieving their
goals. Many lululemon employees had a written set of professional, health, and
personal goals. All employees had access to a “learning library” of personal
development books that included Steven Covey’s The Seven Habits of Highly
Effective People, Rhonda Byrne’s The Secret, and Brian Tracy’s The Psychology of
Achievement. The core values of lululemon are presented in Exhibit 6.

Chip Wilson had been the principal architect of the company’s original culture and
core values, and the company’s work climate through 2013 reflected his business
and lifestyle philosophy. Wilson had digested much of his philosophy about life in
general and personal development into a set of statements and prescriptions that
he called “the lululemon manifesto.” The manifesto was considered to be a core
element of lululemon’s culture. Senior executives believed the company’s work
climate and core values helped it attract passionate and motivated employees who
were driven to succeed and who would support the company’s vision of “elevating
the world from mediocrity to greatness”—a phrase coined by Chip Wilson in the
company’s early years. For several years, the company’s shopping bags were
emblazoned with a full print of the manifesto, as a means of sharing its culture and
beliefs about life in general with customers, the local community, and the public at
large.
The death of George Floyd in May 2020, the resulting social unrest, and the Black
Lives Matter movement had a powerful impact on lululemon. Following a broad
conversation within the organization, and with the support of lululemon
leadership, the company made a significant commitment to fund Inclusion,
Diversity, Equity and Action (IDEA) within the lululemon organization. Among
the initiatives was a commitment to create an ongoing dialog with
underrepresented members of the company, expand training, learning, and
development, and to increase diverse representation among lululemon employees.
In June 2020, lululemon committed to invest $5 million a year to fund the
company’s global IDEA activities.36 The company offered all employees IDEA
education, training, and guided conversations on a variety of topics, including
antiracism, antidiscrimination, and inclusive leadership behaviors. The goal was to
foster a culture of inclusion by making IDEA part of employees’ everyday
conversation and by frequently reviewing company policies, programs, and
practices to identify ways to be more inclusive and equitable.

In October 2020, the company released its first Impact Agenda, detailing the
company’s long-term commitment to build a more sustainable and equitable
business. The Impact Agenda was organized around three interconnected areas of
focus goals—Be Human, Be Well, and Be Planet, along with 12 underlying goals to
measure progress.37
Page 283
 EXHIBIT 6 lululemon Core Values, 2022

Connection. I put people first. I build trusting relationships. We are all

one team.
Courage. I relentlessly pursue greatness and know that possibility is
bigger than the fear of failure.
Entrepreneurship. I’m all in. I continuously innovate and own my
results.
Fun. I believe that fun is a choice. It’s what allows me to turn work into
play.
Honesty. I am open and sincere.
Inclusion. I actively remove barriers to equity so that everyone has a
sense of belonging.
Personal Responsibility. I have a choice and I am accountable for my
actions.
Source: lululemon athletica
COMPETITION IN ATHLETIC APPAREL
Competition in the market for athletic and fitness apparel was fierce. Companies
competed principally on product quality, performance features, innovation, fit and
style, distribution capabilities, brand image and recognition, and price. Rivalry
among competing brands was global, vigorous, and involved both established
companies who were expanding their production and marketing of performance
products and recent entrants attracted by the growth opportunities. lululemon
competed with wholesalers, retailers, and direct sellers of premium performance
athletic apparel made of high-tech fabrics, most especially Nike, adidas Group AG,
Under Armour, and Athleta (a subsidiary of The Gap, Inc.).
Nike
Nike had a powerful and well-known global brand name, an extensive and diverse
line of athletic and sports apparel, and 2021 global sales of $44.5 billion ($17.2
billion in North America). Nike’s sales outside of North America accounted for
just over 61 percent of its worldwide revenues in fiscal 2021. Not only was Nike the
world’s largest seller of athletic footwear (its footwear sales exceeded $28 billion in
fiscal 2021), but it was also the world’s largest sports apparel brand, with 2021
sales of $12.8 billion. Sales of Nike products to women totaled $8.6 billion in 2021.
The company had selling arrangements with independent distributors and licensees
around the world; its retail account base for sports apparel in the United States
included a mix of sporting goods stores, athletic specialty stores, department
stores, and tennis and golf shops, plus it had a network of factory outlet stores (204
in the United States and 618 across the rest of the world) and Nike and
NIKETOWN retail stores (30 in the United States and 46 in the rest of the world).
Nike also had a strong online sales presence via web and apps in 45 countries
around the world (www.nike.com); in fiscal year 2021, Nike Direct revenues grew
30 percent to $16.4 billion worldwide.
Page 284
Adidas
The adidas Group was a global company headquartered in Germany that had
worldwide sales of €21.2 billion ($23.0 billion) in 2021. Worldwide sports apparel
revenues for the company were €8.7 billion ($9.5 billion) in 2021; its product lines
consisted of high-tech performance garments for a wide variety of sports and
fitness activities, as well as recreational sportswear. The adidas Group sold
products in virtually every country of the world. In 2021, its extensive product
offerings were marketed through third-party retailers (sporting goods chains,
department stores, independent sporting goods retailer buying groups, lifestyle
retailing chains, and Internet retailers), 2,200 company-owned adidas and Reebok
retail stores, franchised stores, and the company’s e-commerce website at www.adid
as.com. In August 2021, adidas announced that it would be selling the Reebok
brand and operations to Authentic Brands Group, with the transaction to be
completed in the first quarter of 2022.38
Under Armour
Under Armour, a designer and marketer of performance sportswear, had total sales
of $5.7 billion in 2021, of which $3.8 billion was in apparel. Like lululemon, Under
Armour’s apparel products were made entirely of technically advanced, high-
performance fabrics and were designed to be aesthetically appealing, as well as
highly functional and comfortable. Under Armour regularly upgraded its products
as next-generation fabrics with better performance characteristics became available.
Under Armour’s product line included apparel for men, women, and children.
Under Armour’s sales and net income had been uneven between 2019 and 2021;
the company booked a $549 million loss in 2020. The company reported
significant disruptions in their operations during the COVID-19 pandemic. The
majority of Under Armour’s sales were made through wholesale channels,
including sporting goods stores, independent and specialty retailers, department
stores, institutional athletic departments, and sports leagues and teams. However,
as of January 2022, the company also operated 180 factory outlet stores and 19
Brand House stores in North America, as well as factory outlet stores and Brand
House stores in international locations. Under Armour had direct-to-consumer
sales of about $2.3 billion annually, which included factory outlet stores and the
company’s e-commerce website, www.underarmour.com.

Nike, adidas Group, and Under Armour all aggressively marketed and promoted
their high-performance apparel products to women and men and spent heavily to
grow consumer awareness of their brands and build brand loyalty. All three
companies sponsored athletic events, provided uniforms and equipment with their
logos to collegiate and professional sports teams, and paid millions of dollars
annually to numerous high-profile male and female athletes to endorse their
products. Like lululemon, these companies designed their own products but
outsourced the production of their garments to contract manufacturers.
Athleta
A relative newcomer to women’s athletic and fitness apparel, Athleta was a
subsidiary unit of The Gap, Inc. The Gap acquired Athleta in 2008 for $150
million. After the acquisition, The Gap converted Athleta into a retail chain to
compete head-on against lululemon in the market for comfortable, fashionable,
high-performance women’s and girl’s apparel for workouts and training, sports
(tennis, golf, soccer, gymnastics), physically active recreational activities
(swimming, surfing), dance, sleep, camp essentials, and leisure wear. Athleta’s
garment lineup included tops, sweaters, shorts, skirts and skorts, tights and
leggings, pants, dresses and rompers, jackets, bras, swimwear, sleepwear, and
accessories (hats and hair accessories, shoes, socks, sun protection and sunglasses,
bags and wallets, and workout accessories) in sizes ranging from XXS to 3X. In
addition to Athleta’s sales at its retail stores, it also derived from periodic mailouts
of Athleta catalogs, and revenues from online sales at www.athleta.gap.com.
Athleta also had a social media website, https://community.athletawell.com/, that
was dedicated to women’s well-being.

In 2016, Athleta launched its Athleta Girl collection and in 2020 introduced its
first sleep collection. Also in 2020, Athleta expanded its offerings to include large
sizes (1X to 3X) and launched franchised Athleta stores in the United Kingdom. In
2021 Athleta opened 28 new stores in the United States, opened its first stores in
Canada, and launched an Athleta website in Canada. Going into 2022, Athleta had
grown to 227 retail stores in North America, with an average store size of nearly
4,000 square feet. The Gap planned to continue opening Athleta stores in 2022
and beyond, both domestically and internationally. Athleta had net sales of $1.45
billion in fiscal 2021 (up 27.5 percent from $1.14 billion in fiscal 2020); Athleta
stores open at least 12 months had sales growth of 12 percent in fiscal year 2021.
To spur sales of Athleta branded garments and achieve its recently announced
strategic objective of $2 billion in net sales by the end of fiscal 2023, Athleta
entered into a distribution partnership with REI (Recreational Products, Inc.) in
late 2021 to begin selling a selection of Athleta products in REI’s 135 retail stores
and at its website.
Page 285
The Gap, which also owned the Old Navy and Banana Republic retail
chains, launched an integrated rewards program in 2021 to encourage cross
shopping and attract new customers across all its store brands (The Gap, Athleta,
Old Navy, and Banana Republic) and its 2,800 company-operated stores and 560
franchised stores. In addition, the Gap had instituted separate private label credit
card programs for its four retail chains and a cobranded credit card program
through which frequent customers received benefits.

The Gap also competed directly in the market for sports and athletic apparel. Its
GapFit line of women and girls apparel products included breathable, high-
performance garments for running, training, yoga, Pilates, tennis, hiking, and
swimming as well as sweatshirts, hoodies, sweaters, dresses, pants, leggings,
rompers and jumpsuits, jackets, and outerwear in a wide range of styles and in sizes
XXS to XXL. Its product line for men and boys included activewear (workouts,
training, jogging), T-shirts, polos, shorts, pants, sweaters, hoodies, sweatshirts,
sweatpants, jackets, and outerwear in assorted styles and in sizes ranging from XS
to XXXL.
Other Competitors in the Sports and Fitness Apparel
Market for Women and Men
Apparel retailers responded to the growing market for women’s and men’s sports
and fitness apparel by introducing brands and new collections to compete in this
segment. Entrants into this segment of the apparel market included The Gap,
Nordstrom, Urban Outfitters, and Victoria’s Secret.

Nordstrom, a respected department store retailer, merchandised its Zella line of

attire for yoga, cross-training, workouts, swimming, and “beyond the workout.”
Many of the initial products in the Zella collection were designed by a former
member of lululemon’s design team. Nordstrom also marketed several other brands
of activewear for women, men, and juniors, including Nike, Under Armour,
Patagonia, Reebok, and Adidas. In 2021, Nordstrom’s activewear offerings could be
purchased at 94 Nordstrom full-line department stores (typically 140,000 to
250,000 square-feet in size) and 240 Nordstrom Rack stores (typically 30,000 to
50,000 square-feet in size) in 40 states, at Nordstrom’s website
(www.nordstrom.com), and at the Nordstrom Rack website,
www.nordstromrack.com.

Urban Outfitters operated three different retail store brands: Urban Outfitters,
Anthropologie Group, and Free People Group. The Urban Outfitters stores carried
an extensive line of women’s activewear and workout apparel. As of January 2022,
Urban Outfitters operated 261 stores, of which 184 were in the United States.39
Product offerings included active wear bottoms, sneakers, active wear tops, sports
bras, and workout equipment. Products were sold both in-store and on the Urban
Outfitters website at https://www.urbanoutfitters.com/.

Victoria’s Secret also marketed its own line of women’s fitness apparel under the
Victoria’s Secret label. As of April 2022, Victoria’s Secret offered hundreds of
fitness apparel items in its stores and on the company’s website,
www.victoriassecret.com. Offerings included sports bras, bottoms, yoga pants,
sweatshirts, and hoodies.
Typically, the items in the Athleta, Zella, Urban Outfitters, and Victoria’s Secret
collections were priced 10 percent to 25 percent under similar types of lululemon
products. Likewise, Nike, adidas and Under Armour apparel was usually less
expensive than comparable lululemon branded items.
Dealing with the Global Pandemic and
Recovery
Outbreaks of COVID-19 (also known as the coronavirus) began in China in
December 2019, spread to other countries in the first months of 2020, and was
declared a global pandemic by the World Health Organization in March 2020.
Mounting concerns about the potential for the coronavirus to infect a large
percentage of the global population and overwhelm hospitals prompted
government officials in many countries during February to April 2020 to issue
“stay-at-home” orders to the general public, urge companies to allow employees to
work from home where feasible, and mandate the closure of retail stores and all
“nonessential” local businesses until the daily/weekly number of people in their
locales being newly diagnosed with COVID-19 began to flatten out or subside.
People were urged to practice “social distancing” and wear face masks when
grocery shopping, picking up to “to-go orders” from local food establishments, or
otherwise venturing out beyond the confines of their homes to run errands. As of
April 2022, there had been over 500 million diagnosed cases of COVID-19,
resulting in over 6 million deaths worldwide.40

The global pandemic had a devastating impact on most apparel retailers. Page 286
In North America, luxury retailer Neiman Marcus, apparel retailer J.Crew, and
department store retailer JCPenney filed for bankruptcy in May 2020. Other
retailers and businesses struggled to survive in 2020 and 2021 as well. As of April
2022, most apparel retailers and millions of local businesses in North America,
Europe, and elsewhere were wrestling with the lingering impact of the global
pandemic.

Apparel retailers whose customers could readily transition to online shopping at

their websites were better able to weather the pandemic-related downturn in store
sales. Nike, the global sports apparel leader, had a strong digital presence and
experienced only a modest and short-lived downturn in sports apparel revenues.41
However, China was struggling mightily to contain and eradicate local COVID-19
outbreaks in February to May 2022, affecting Nike production and retailing
operations along with other sports and apparel marketers with retailing and/or
production operations in Mainland China. The adidas Group, number two globally
and financially strong, also came through the pandemic in a competitively strong
position, with sales improving sharply in fiscal 2021. Under Armour’s situation,
already weakened by sales troubles in North America, was made worse by the
pandemic.42
Copyright © 2022 by Arthur A. Thompson and Randall D. Harris. All rights reserved.