Case Study for Financial: lululemon athletica inc.

lululemon athletica inc. is a Canadian athletic and leisure apparel company known primarily for its community-based stores that sell expensive and stylish yoga-inspired apparel. lululemon athletica inc. became a public company in 2007 when it issued an initial public offering (IPO) of its common shares. A public company means that anyone could have bought shares in LULU on the public stock exchange [NASDAQ]. Most importantly, public companies must disclose their financial statements on a regular basis. For this assignment students will need to read the 5-page collection of financial results issued by lululemon athletica inc. in September 2021.

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1. It is important to understand how to read financial statements. Review the Consolidated Balance Sheets and Consolidated Statement of Operations for lululemon athletica inc. while noting that the figures are expressed in thousands of USD. INSERT the following amounts for lululemon athletica inc. (rounded up or down to the nearest million expressed in USD):

(a) Cash and cash equivalents as at fiscal year ended January 31, 2021 = $___________ million

(b) Inventories as at fiscal quarter ended August 1, 2021 = $___________ million

(c) Unredeemed gift card liability as at fiscal year ended Jan. 31, 2021 = $___________ million

(d) Revenue for the two quarters ended August 1, 2021 = $___________ million

(e) Cost of goods sold for the quarter ended August 1, 2021 = $___________ million

(f) Gross Profit for the two quarters ended August 2, 2020 = $___________ million

(g) Selling, general and admin expenses for quarter ended Aug. 2, 2020 = $___________ million

(h) Basic Earnings per Share for the two quarters ended August 1, 2021 = $__________

2. The Strategic and Financial Logistics chapter explains why many successful businesses are likely to pursue targeted business strategies. Describe each of the three generic business strategies that a global clothing company could pursue to develop and maintain a sustainable competitive advantage with its target customers. Explain the business strategy or strategies that you believe lululemon athletica inc. uses and provide one or more arguments or examples to support your answer. [2 marks]

ANSWER:

3. Explain the meaning and difference of the terms “Gross Profit” and “Gross Profit Margin”. [1 mark]

ANSWER:

4. Understanding data and making calculations are useful tools to determine the part or parts of the supply chain that may be in need of logistical improvements. For lululemon athletica inc. describe, identify, calculate and/or describe the following: [1 mark each; 3 marks total]

A. whether the company’s gross profit margin increased or decreased in the 2nd quarter of fiscal 2021 compared to the 2nd quarter of fiscal 2020; AND does the increase/decrease in lululemon’s most recently reported gross profit margins mean the company had more or fewer sales at discounted prices in the 2^nd quarter of fiscal 2021.

ANSWER:

B. whether Direct to Consumer revenues (e-commerce revenues) increased or decreased following the re-opening or further opening of Company-operated stores during Covid-19;

ANSWER:

C. Calculate and describe the ROA (Return on Assets) for lululemon athletica inc. for the 2nd quarter of fiscal 2021 compared to the 2nd quarter of fiscal 2020.

ANSWER:

TRANSPORTATION MODES AND MANAGEMENT

In its report to shareholders lululemon athletica inc. provided a COVID-19 Update in which the company stated: “The pandemic has also impacted our product manufacturers and our distribution and logistics providers. We have experienced disruption in transportation and port congestion, as well as an increase in freight costs.”

5. Describe the relative merits of each of the four (4) modes of transportation that may be used by a global clothing company; AND describe what kind of disruptions in transportation you believe may have been encountered by lululemon athletica’s suppliers and distributors.

ANSWER: [3 marks]

6. Environmental and sustainability concerns are an increasingly important consideration for brands in the selection of the mode of transportation to use for shipments of clothing goods. Research or use the best of your knowledge to fill in the following blanks: [1 mark]

For a company to reduce its carbon footprint it must shift from the most carbon-intensive modes of transportation such as __________________ and _____________________ into less carbon-intensive modes such as _____________________ and _________________________.

7. Describe each of the four (4) factors mentioned in the textbook that would most commonly be used to determine a clothing product’s freight classification.