Lululemon is a multibillion-dollar leader in the high-end active wear category that owns and operates 600 stores, 40 of which are located in Europe. Its roots date back to 1998 when it opened as "Lululemon Athletica," a yoga-wear brand geared toward women and yoga enthusiasts.
With in-store services, a heavy emphasis on community symbolized by its well-loved, reusable shopping bags, the brand offers an upscale shopping and product experience.
Demand for athletic wear has grown exponentially since those early days, and in 2022 Lululemon continues to lead the way, with its second-quarter revenue soaring 29% year over year. What's more, the company's three-year compound annual growth rate increased by 25% for women and 30% for men.
Today's success does stand in contrast to challenges it has seen in the past with unsteady leadership, product mishaps and supply chain delays. For example, Lululemon co-founder Chip Wilson stepped down in 2013 after a series of inflammatory remarks about its new line of leggings. That set off a consumer controversy. Now, inflation is seen as a looming risk to that double-digit growth.
"The consumer is becoming much more cautious about spending," said Neil Saunders, managing director and retail analyst at GlobalData. "And while I think Lululemon's customer loyalty will hold it in good stead, a consumer downturn is bad news for any brand, and it might take some of the heat out of Lululemon's growth."
Nevertheless, the company continues to innovate and diversify into different categories and wider tech offerings. Two years ago, it acquired tech and in-home exercise startup, Mirror, for $500 million and this year it launched a new membership program. The company also unveiled women's footwear products this year.
Those types of initiatives are reflective of Lululemon's ambitious five-year plan set in April 2022 with three strategic pillars — innovation, guest experience and international expansion — at its core. What's more, it aims to double its digital sales and quadruple its international revenue by 2026.
Though its diversification efforts have been met with mostly positive reactions so far, some analysts worry its wider product breadth could dilute focus for the brand that grew from humble roots.