Lululemon Athletica Inc Strategic Analysis

Vancouver-based Lululemon Athletica Inc. has provided premium quality apparel to premium customers with notable financial gains in the past half a decade (Lululemon, 2021). The company’s business aspects seem to be improving despite the worsening state of the economy. This moderately famed designer and retailer of yoga-based clothing and related accessories closed 2015 with unexpected gains. These gains were mainly driven by various successful product categories, including certain men’s product lines and women’s pants. The company’s margins were significantly better in the final quarter despite being quite average in the previous financial periods (Macrotrends, 2021). Generally, the brand has attained a reasonably strong imprint in retail, and the management is trying to use this strength to push more sales and drive higher revenues. Although sales are expected to grow in the forthcoming quarters, the biggest question that the management needs to consider is how it can boost profitability after posting flatshare figures (Baalbaki, Gilliard, & Hoffman, 2019) rather. Will the stock price recover after taking a downward trend in the past quarter? Perhaps another question that needs to be considered is whether Lululemon will compete with its fierce competitors, which have larger market shares and stronger brands. This paper presents a strategic analysis in the form of a SWOT analysis to evaluate its current positions as it relates to strengths, weaknesses, opportunities, and threats.

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            One of the greatest strengths of Lululemon is its premium brand affinity (Wu, Greenberg, Pridemore, Yuan, & Yan n.d.). A larger part of the company’s following consists of a sect-like group consisting of educated, health-sentient, and high-income female audiences (Stokes & Adams, 2008). Some of the most preferred products include its comfort wear apparel and yoga pants. These products appear to be appealing to Lululemon’s customers. Despite recent price hikes, the company’s business has continued to improve (Schlossberg, 2015). Customers appear to be recognizing the legitimacy of the price hikes as current products are manufactured from new high-tech materials rare in the market. Despite the small size of the company, compared to more prominent brands like Nike, it has managed to record the highest sales per square foot in the retail sector. Lululemon’s leadership in the rising athletic apparel segment is defined and firm.

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            Another critical strength in Lululemon’s strategy is its inclination to ride the athleisure bandwagon. As more people continue to adopt a health-conscious mind, the business has found it necessary to cater to this potential customer group. The approach seems to be effective as the business is continuously growing over time. The rising need for athletic apparel that can be worn in sport settings and around urban neighborhoods should see Lululemon pulling more financial gains since such clothing types are core to its enterprise. The casualization of clothing has been particularly pervasive in the American market (Ganak, Summers, Adesanya, Chi, & Tai, 2019), and people are more willing to wear casual clothes anywhere. This is positive news for Lululemon.

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            A healthy balance sheet is an additional strength for Lululemon. Not only does the company have a good record in finances, but it also lacks debt. This should allow the business to reinvest its profits and repurchase shares in the forthcoming quarters. Though the retailer has never disbursed dividends, it is in an excellent position to start doing so. Lululemon’s robust financial growth is being noticed in the financial markets and among competitors such as Nike and Under Armour.

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            While a premium brand affinity may be one of Lululemon’s strengths, it could also be one of its principal weaknesses. The company charges significantly high prices for its products, partly due to its high input in research and development. This price catalog is relatively higher than that of its competitors. Similar products from Under Armour and Nike cost considerably less. High prices may not hurt its premium customers. However, it could hurt business strategy once the firm attempts to explore other markets and when macro-environmental forces impose economic constraints on the existing pool of customers.

            Brand perception is another area where Lululemon is weak. For the longest time, since its inception, the brand has been perceived as a yoga brand. This perception is suitable when targeting yoga customers. However, it limits Lululemon’s expansion goals. In fact, the company has not experienced revolutionary success while trying to expand beyond this audience. While there is a large percentage of people among its customers who use apparel for sporting activities, the brand has not convinced the market that its product lines can serve purposes outside the sports domain.  Another issue relating to brand perception is that Lululemon is essentially viewed as a female-only brand (Tybout, 2017).  Indeed, the company has struggled to expand past the female demographic as men’s wear only comprises 6% of sales. On the other hand, competitors like Nike have managed to pull male customers from the market.

            Lululemon’s largest opportunity is the chance to expand to the international market. Until now, a larger share of the firm’s sales is concentrated in North America. The management has recognized international expansion opportunities, primarily targeting Asian and European markets where the company only registered 11 units in sales in 2015. With the prospect of opening an additional 11 stores in the international market, the company hopes to accelerate its expansion across the world (Bearne & Bearne, 2014). The goal is for international sales to account for at least 20% of total sales. In addition to international expansion, Lululemon seeks to continue expanding its reach in the North American Markets, including the United States and Canada. The opportunity for market expansion should be bolstered with the chance to use eCommerce platforms, which are less costly in terms of capital.

            Another critical opportunity is the prospect of expanding product lines. Since Lululemon has already registered noteworthy success in the women’s pants segment, now would be an excellent time to enhance its women’s tops segment. The retailer should also consider the men’s segment, which has a considerable potential to drive profits in the running, training, and yoga sub-segments.

            The biggest threat to Lululemon’s business is competition. The market for athletic clothes is exceptionally competitive, and the firm competes directly against renowned brands and wholesalers, some of which are primarily focused on women’s athletic apparel. Traditional sellers of athletic apparel are also a cause for concern. Examples of significant competitors are The Gap, Under Armour, Reebok, and Nike. A majority of these companies have existed longer than Lululemon and are more aware of market needs. They also offer products at lower price points.

            Succinctly put, Lululemon has a solid growth strategy due to its premium brand image and prospected expansion to international markets. Nevertheless, the management needs to address a few strategic issues for the firm to remain financially and competitively successful in the near future. These include quality control, lacking technological integration, narrow focus, and lack of brand awareness. Quality control relates to the firm’s level of quality and customer satisfaction. Lululemon should pay attention to critical indicators of quality such as customer satisfaction and amount of recalls. Recent product recalls should be investigated in-depth to avoid catastrophic failures (Tsang, Chu, Pothecary, & Chung, n.d). This could be achieved with technological integration, such as collecting reviews from customers through eCommerce platforms. Technological integration could also help the company boost sales without adding much to its costs. The problems of narrow market focus and limited brand awareness should be solved through aggressive marketing campaigns. The management should consider social media because of its low fees and potential to reach large audiences worldwide. The option of hiring a social media manager should be reflected upon to enhance Lululemon’s marketing realm. Additionally, the firm should contemplate the cultivation of brand presence in major online platforms, including YouTube, Twitch, and Facebook. This will go a long way in creating large followings and deeper customer relationships. The firm should also contemplate the option of differentiating its product further. Production differentiation creates the opportunity to sell to more audience types while leaving enough room for teaking prices. The present price catalogue is largely inaccessible by a majority of sports-centric buyers. Lululemon should benefit from its solid growth plan. The prospects of increasing men’s offerings, venturing into international markets, and catering to more customer segments should prove useful in achieving success. The business inclination towards the health-conscious market is incredibly shrewd as people around the world are recognizing the benefits of maintaining an athletic lifestyle.

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