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Lululemon rides out recession in quality fashion


Christine Day could have followed the path of other high-end retailers in the recession. They slashed prices and scaled back offerings as consumers pulled back their spending.

Instead, the chief executive officer of yoga wear purveyor Lululemon Athletica Inc. took a contrarian approach - and now it's paying off.

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She invested in improving the quality of her athletic wear, and didn't budge on prices. She enticed shoppers into the stores with new offerings, most notably, expanding into running outfits, which is a top growing category in women's athletic apparel along with yoga garments.

And she added an array of jackets and accessories, ranging from water bottles to travel pouches, and tried to inject a bit of "happy" into her customers' lives by introducing brightly-hued garments to co-ordinate with basic blacks. Last April, she rolled out an e-commerce site.

"In the toughest times you really have to continue to make your decisions based on the long-term value for the brand," Ms. Day said in an interview yesterday. "By making tough calls early, we were able to really engage the loyalty of our people ...

"It meant getting grounded in our strategic advantages and opportunities, and getting the execution on track."

Yesterday, the company released better-than-expected fourth-quarter results and an upbeat outlook. Investors rewarded it by sending its stock to a 52-week high after it had quadrupled in value over the past year.

Once a stock-market darling, Vancouver-based Lululemon grew rapidly in the United States after going public in the summer of 2007. But the tight times later caught up with it and sales took a tumble.

Ms. Day took over the reins as CEO in mid-2008 with the mission of transforming a small entrepreneurial growth company into a more disciplined and structured retailer that would still be a hot destination for athletic wear.

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Her 20-year career at coffee specialist Starbucks Corp. helped her ride the bumpy road at Lululemon. It also helps that, at 48 and a runner and yoga enthusiast, she walks in the shoes of her customer.

"She helped the company focus on what it was really good at," said analyst Jennifer Black at Jennifer Black & Associates LLC in Lake Oswego, Ore. "She helped to get the merchandise back on track ... She understands how important it is to have a defined culture and to stick with that."

Still, Ms. Day faces snags. While she poured money early in the recession into a supply chain that ensured the retailer was restocking popular items, the systems still aren't up to speed. The retailer keeps running out of high-demand styles and sizes because of stronger than anticipated sales.

Lululemon has had to invest extra money into air-shipping products from overseas to try to meet demand.

"It's a challenge that every retailer would love to have," said Ms. Black, who has been donning Lululemon pants and tops for years.

Ms. Day concurs: "It's a pretty good problem to have."

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Now the company is talking with its suppliers about how it can respond faster to unanticipated demand. She predicted that the problem will be solved "in the short term."

But a lot of her focus has been on her core customers. She's helped bolster the running wear business by supporting marathons and launching an "ambassador" program in stores to match its yoga strategy. Just as the stores run free yoga classes, it now also organizes running groups.

She is part of a group in Vancouver, getting out twice a week at 7 a.m. for a 45-minute jog and 15-minute yoga stretch. And she's able to do market research on the run. "Every runner I run by, I'm counting the Lululemon pieces."


Lululemon Athletica

Q4 / 2009 / 2008

Profit / $28.5-million / $10.9-million

EPS / 40¢ / 16¢

Revenue / $160.6-million / $103.9-million

All figures in U.S. dollars

Source: Company reports


Yesterday's close $40.43, up $3.52

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More

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