Lululemon Athletica SWOT and PESTLE Analysis

Strength

1. Market leader in yoga and workout clothing for women in North American markets: Lululemon has achieved market leader position in yoga and work out clothing for women in the North American market. The company is credited as the pioneer of the athleisure apparel trend that has seen huge growth in recent years. Since Lululemon sold the first pair of yoga pants in 1998, it has come a long way, riding the athleisure trend and posing a serious threat to the jeans industry in the process. People have started wearing yoga pants even to the office, which has increased the usage of Lululemon’s products. The company invests a significant amount of money to develop new fabrics trademarked fabrics for fending off rivals. The Luon fabric was trademarked in USA in 2005. The newer fabrics developed by the company like Luxtreme, Nulux and Silverescent are branded and geared for specific uses.

2. Control of both production and distribution aiding margins and customer loyalty: Lululemon is able to enjoy expanded margins and new opportunities because of its control over both production and distribution. Lululemon has avoided the common retail practice of selling its product in department stores. This has helped build customer loyalty and gave the company better control over discounts, pricing and marketing. In contrast, companies selling through third parties have to share margins. Lululemon sells high margin apparel, priced at $100 or more, through physical stores as well as on the website. In 2019, the physical stores contributed 62% of the revenue whereas 28% of revenue came from the website.

3. Strong operational performance and goal delivery ahead of schedule: The company delivered strong operating results in 2018, with revenue increasing by 24% and adjusted earnings per share increasing by 48%. Gross margin was 55.2%, e-commerce penetration was 26% and operating margin was 21.5%. This growth was driven by multiple successful initiatives like store openings in new and existing markets across the world, strong performance in China, positive customer response to product innovations and strong digital platforms. Many of the goals set for target 2020 were met ahead of schedule, setting the stage for a new five-year vision for the future. In 2019, the company continued its growth. Revenue grew by 21%. Operating margin increased by 80 basis points to 22.3% and earnings per share grew by 37%.

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Weakness

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Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Reduction in waste footprint: The company focuses on reducing waste footprint through appropriate packaging choices. Minimizing material use, selecting preferred materials and recyclable packaging are some methods used under the company’s sustainable packaging policy. Lululemon has switched from paper-based packaging to FSC certified materials. 90% of the company’s excess and damaged products are donated, resold or recycled. Out of 5 distribution centers of the company, 4 have achieved zero waste status, which means over 90% of their waste materials have been reused and recycled for more than a year. The remaining distribution center is expected to achieve this status by 2021.

2. Controlling greenhouse gas emissions: Lululemon is committed to reducing greenhouse gas emissions across the value chain. The focus is on increasing efficiency, inter-industry collaboration and investment in renewable energy transitions. The target is to achieve 100% renewable electricity for the company’s facilities by 2021, and 60% reduction in GHG emissions in facilities and the supply chain by 2030. Lululemon plans to achieve these targets by 4 strategies: renewable electricity sourcing through renewable energy credits and virtual power purchase agreement, engagement with manufacturing partners for energy efficiency progress, increase in sourcing of sustainable raw materials, and reduction of carbon emissions in inbound logistics.

3. Responsible sourcing of raw materials: As per a study conducted by McKinsey, there is rising consumer demand and societal expectations for sustainability. Sustainable fashion is fast becoming a major driver of purchasing decisions. Internet searches for sustainable fashion tripled between 2016 and 2019. In US and Europe, hits on Instagram hashtag #sustainablefashion quintupled during the same period. As part of its commitment to sustainable sourcing, Lululemon has successfully got 100% of its down product certified by Responsible Down Standard (RDS). This is a global standard that tracks each step in the supply chain and ensures feathers used in down products are obtained from ducks and geese that have been humanely treated.