Why is Lululemon Athletica Inc. Doing so Well?
After being listed today on The Street’s 10 Stocks to Watch and having their first quarter sales coming ahead of both analysts’ and company expectations, I’ve been hearing buzz about the high-end yoga retailer, Lululemon, from more unusual suspects, such as my male colleagues who have never done yoga in their life.
With such a large focus in the media on our economic recession and constant talk about the need for jobs, it is amazing that a store that charges $98 for a pair of yoga pants when you can get a pair from Target for less than $20 is thriving. I think the big question on everyone’s mind is why?
I personally think the biggest thing Lululemon has done right is choosing to target the yoga audience, specifically. Being a part of this audience, myself, I understand the demographic. You might think that one who practices yoga is one of those free-spirits that cares more about the earth than the clothes they wear. Personally, I wish the culture was that way, because my wallet might be a little heavier these days if I didn’t feel out of place going to yoga classes and being the only one wearing a generic brand.
The best way I can explain the culture is “spendy.” While you could take a community ed yoga class for $36 a month, that is not the yoga community I am referring to. I am referring to the Corepower and Lifepower yoga communities. The fact that it costs around $120 to take a month of yoga classes at one of these places goes to show that this community has got some money to spend.
I’ve sporadically gotten into yoga a few times over the past four years when I’ve decided I needed to start working out again. When I got into it again this April, I couldn’t help but notice the up-side-down “U” everywhere. It was Lululemon take-over and it wasn’t just on the pants people wore; it was on their water bottles, headbands and workout bags. Being someone that loves to shop, I went into a Lululemon a week into staring yoga classes again and bought a pair of pants and a couple tank tops – they were on sale and I could still barely afford them.
The products I’ve bought, I love, and the company’s earnings clearly show I am not alone in that opinion. The brand is accepted by the yoga community as having the best yoga products and yogis, who are primarily female yuppies with more disposable income than the average person, will do whatever it takes to buy its products.
With the target audience being people that 1. have money and 2. want to be trendy, it makes sense that Lululemon is thriving. We just have to understand that their audience is probably not the same people we hear complaining about the economy.
The other thing that I think Lululemon has done well is their marketing. The store has raised its profile in a positive way by giving back to the community that supports it. The store hosts a free yoga class every Sunday, moving the clothing racks to the side and allowing the public to attend (read about Sweaty Sundays at the West End location). It also hosts free yoga events around town (see details on an event it is hosting at Brits Pub in Minneapolis), sponsors local yoga instructors and marathon events to build its running-apparel collection.
I think Lululemon is going to be watched much more closely by marketing and PR pros, as well as those investing in LULU stock from now on.