Q: Snapshot of the company background and development trajectory (1. including critical stages, 2. product offerings and markets, and 2. useful financial numbers based on given case information only)(Lululemon Athletica: Driving Global Strategy Case )

On January 31, 2021, Lululemon Athletica Inc. (Lululemon) had just ended fiscal year (FY) 2020 with astrong performance (see Exhibit 1). The Vancouver, Canada-based seller of high-priced athleisure wearproducts for both women and menknown for its stylish US$98¹ yoga pantshad brought in over $4.4billion in sales in FY 2020, with 86 per cent of sales coming from the United States and Canada.Unsurprisingly, WallStreetwasoptimistic aboutLululemon's future:the company's stockclosed 2020at

$328.68, up 37.30 per cent compared to the previous year's close at $239.39 (see Exhibit 2), or more thantwotimesthe Standard& Poor's (S&P)500 record highpriceindexof 16.26percentfor2020.²

Despite the disruption of the COVID-19 pandemic, Calvin McDonald, chief executive officer (CEO) ofLululemon, and his management team remained intently focused on the company's five-year growthstrategy ("Power of Three"), which was unveiled on April 24, 2019, to accelerate growth. This strategynotably included quadrupling the company's international sales generated outside of North America from2018 levels, to $1.44 billion, by the end of 2023.As 2020 turned to 2021, McDonald told shareholdersthat the company aimed to ultimately generate 50 per cent of its sales outside its home turf of NorthAmerica. However, it was unclear when this would be achieved, given that approximately 14 per cent oftotal sales came from international markets (outside Canada and the United States). Thus, Lululemon'sglobal expansion was a strategic priority for 2021 and beyond. More specifically, the company announcedits desire to open about 40 to 50 new stores in existing and new markets in 2021; about 30 to 35 of thosewouldbeoutsideofNorthAmerica,especiallyinChina.³AndrMaestrini,whowasonlyamonthintohis role as executive vice-president, international, would be tasked with spearheading Lululemon's globalpush. By the beginning of February 2021, the challenge was figuring out how to achieve the company'sambitiousgoalsforglobalexpansion.⁴

COMPANYBACKGROUND

History

Founded in Vancouver, Canada by Dennis "Chip" Wilson, Lululemon got its start on August 23, 1998.⁵Wilson's eureka (or "aha") moment came in a yoga class in 1997. Wilson had founded a surf-skate-snowboard-orientedclothingcompany,WestbeachSnowboard,in1979,whichprovedtobeunprofitable.

Hesubsequentlysoldthatcompanyandbegandevotingsomeofhissparetimetopractisingyogain1997amovementthatwasjustbeginningtotakeoffinVancouveratthetime.Wilsonnoticedthatthewomeninhisyogaclassworebaggyandsheerdanceclothesthatdidnotsuitthestretchingandsweatingmovementsrequiredforyoga.Atthetime,therewerenowell-fittingbutcomfortableathleticclothingoptionsavailableforwomen,despitetherapidlygrowingnumberofwomenparticipatinginsportsandadoptingfitness-orientedlifestyles.WhileNikeInc.(Nike)andAdidasAG(Adidas)soldsomefemaleapparel,bothcompanieswerechieflyfocusedonmen'sapparelandtheshoemarket.Whenitcametothewomen'sathleticapparelmarket,theiridea,accordingtoWilson,wastotakemen'sappareland"shrinkitandpinkit."⁶

Atage42,Wilsonsawanichemarketforfemaleathleticapparel,andthisinspiredhimtoopenLululemon'sfirst store on West Fourth Avenue in Vancouver's Kitsilano neighbourhood in March 1999. Sales of thecompany's signature stretchy yoga pants and leggings, made from sweat-wicking fabrics that felt likecotton, quickly catapulted the once-small yoga studio into a global powerhouse in athletic-casual wear.WilsondevelopedapersonarepresentinghistargetcustomerintheearlydaysofLululemon:a32-year-oldprofessional single woman (named Ocean), who would pay premium prices to feel healthy and look goodandstylish.⁷Asitturnedout,LululemonandWilsoncreatednewdemandintheathleticapparelmarketbyselling a healthier lifestylenot just stylish yoga pantsto that woman who he thought was "iconic towomen of all ages."⁸ Perhaps most telling of all, Lululemon was widely credited with pioneering themegatrend of athleisure, formally defined by the Merriam-Webster dictionary in 2016 as "casual clothingdesigned to be worn both for exercising and for general use."⁹ In doing so, Wilson and his Vancouver,Canada-basedathletic apparel company"changedtheway womendressed andlived."¹⁰

From its inception, Lululemon did not just make clothes for women practising yoga; it made clothes thataimed to provide people with the components to live healthier, longer, and more enjoyable lives. Thisformed the basis for Lululemon's corporate culture. In 2019, the company detailed "its visionto be theexperiential brand that ignites a community of people living the sweatlife through sweat, grow andconnect,"whichitperceivedasspeakingtoitscustomers(referredtointernallyas"guests"),"whowant[ed]flexibilityandchoice as they leada healthy,mindfullifestyle."¹¹

PowerofThreeGrowthStrategy

McDonald was brought in as Lululemon's new CEO on August 20, 2018. Under his leadership, thecompanymorethandoubleditsstockpricethroughits"PowerofThree"growthstrategy(seeExhibit2).¹²BeforejoiningLululemon,McDonaldspentfiveyearsaspresidentandCEOofLVMH-ownedbeautychainSephoraAmericas.ThroughoutMcDonald'stenureinthisrole,hedelivereddouble-digitgrowtheachyearin addition to growing product offerings, creating new digital platforms, developing in-store experiences,andexpandingtootherglobalmarkets,includingBrazilandMexico.¹³ Byallaccounts,hewasviewedasa growth-oriented leader with a proven track record of running successful businesses. At Lululemon'sAnalystDayeventonApril24,2019,McDonaldannouncedthecompany'sthree-prongedfive-year(2018-2023)"PowerofThree"growthstrategy,thethreestrategicpillarsofwhichwere(1)productinnovation,

(2)omnichannel guestexperiences,and(3)marketexpansion.¹⁴

Regarding the product innovation pillar, the company expected to more than double the size of its men'srevenuesbyyear-end2023.Italsoplannedtocallforcontinuedexpansioninthewomen'sandaccessoriesbusinesses. It planned to grow both existing and new product categories, with lines supporting yoga,running,andtraining.Inaddition,itwouldcontinueitsproductcollaborations,expanditspopularoffice/travel/commutecategory,andpursuenewopportunitiessuchasselfcare.¹⁵Foritsomnichannelguestexperiences,Lululemonexpectedtomorethandoubleitsdigitalrevenuesby2023.Thecompanywould

focusonofferinganintegratedguestexperienceacrosschannels,whichwereintendedtoinspire,provoke,andcelebrateguestswholivedahealthyandmindfullifestyleacrossmultipleexperiences.Theseexperiences included events, dynamic new store formats, and an innovative membership program, whichwas meant to foster connections among guests. Lululemon's market expansion pillar included plans toquadruple its international revenues by the end of 2023.¹⁶ The company's success in its internationalmarkets demonstrated that its idea of "the SweatLife" translated across cultures and regions and presentedconsiderable growth potential for the brand. Expanding across China as well as into countries in the Asia-Pacific region and regions within Europe, the Middle East, and Africa region would be continued areas offocusforLululemon.ItalsoappearedthatconsiderablegrowthpotentialremainedinboththeUnitedStatesandCanada.Thecompanyhadplanstoleverageitsagilestoreformats,digitalexperience,andcommunityconnectionswhenconsideringmarketexpansion.Throughthisgrowthstrategy,thecompanywastargetingannual salesgrowthin the lowteens.¹⁷

THEATHLEISUREINDUSTRY

Athleisure, where fitness met fashion, became the defining fashion of the early 21st century. In the wakeof Lululemon's success, athletic clothes once worn only at the gym had become comfortable and stylishenoughforpeopletowearinnon-athleticsettingssuchaswork,school,grocerystores,andofcourse,casualand social gatherings.¹⁸ Even notable American celebrities such as Kim Kardashian, Cameron Diaz, andJennifer Aniston had been spotted wearing Lululemon yoga pants or leggings.¹⁹ In 2020, Lululemon'sfashionappealwasgrowing, particularlyamongmillennialwomenaged 25-35.²⁰

Mostnoticeably,theCOVID-19pandemicacceleratedtheathleisuretrendandinitiatedariseinhealthandwellness consciousness. With its lockdowns and travel bans, the global pandemic drastically increasedpeople's preference for comfortable, practical, and work-appropriate clothing. For example, "in the U.K.alone, sales of women's athleisure bottoms were five times higher in December 2020 than they were inApril 2020."²¹ Lululemon's ABC pants, which were wrinkle-resistant, stretchy, and suitable for all-daycomfort, became popular among WallStreetprofessionalsinthewakeofthepandemic. ²² Infact,Lululemon cashed in on the athleisure trend, as its shares soared in the global pandemic. After the periodof COVID-19 lockdowns in 2020, athleisure wear, or sports-inspired apparel and footwear, became "thenew default and a competitive battleground" as the lines between sports, casual, and lifestyle wearcontinued to blur.²³ According to the market research company Mordor Intelligence, the global athleisuremarketwasvaluedat$248.31billionin2020.Themarketwasprojectedtoreachavalueofapproximately

$380.66 billion by 2026, with an estimated compound annual growth rate (CAGR) of 6.54 per cent from2021to2026(seeExhibit3).²⁴

However, Lululemon faced increasing competition in mass-marketed athleisure apparel, especially fromsportswearandathleisurespecialtybrands.First,traditionalsportsweargiantssuchasNikeandAdidaswereracingtojumpontheathleisuretrend.Althoughtheyhadbeenslowofftheblocks,theyhadinvestedheavilyingrowingtheirbusinessinwomenswear.Theyhadincorporatedmoreathleisureintotheirofferings(e.g.,yogapants,sportsbras,andleggings)totargetfemaleconsumers,andtheythreatenedtoquicklystealmarketshareawayfromLululemon.²⁵Forexample,NikestretchedintoLululemon'sterritorybylaunchingitsfirst-everyogacollectioninJanuary2019.²⁶Furthermore,smallerbrandsspecializinginyogaapparelandotheractivewear,suchasGapInc.'sAthleta,Fabletics,theUnitedKingdom'sSweatyBetty,andAustralia'sLornaJane,foughtagainstthecompetition.²⁷Someluxurygoodscompanies,includingLouisVuittonandVersace,soughttomergetheirluxurywithLululemon'stechnology,launchingtheirownleggingsandsportsbras,with prices much higher than $400.²⁸ Other famous women's brands such as Victoria's Secret and fast-fashionretailerslikeH&MGroupalsomadetheirwaytothegrowingathleisurespace.²⁹

THELULULEMONBUSINESSMODEL

ProductDesignandDevelopment

At the core of Lululemon was an innovative company obsessed with technical performance, comfort, andstyle. ³⁰ The company'sin-houseinnovationandresearchanddevelopmentlab,calledWhitespace,pioneered the Science of Feel approach to its product design and development to solve unmet needs,especially those of women. Established in 2012, the Whitespace lab, which included former scientists,psychologists, and anthropologists, was tasked with understanding how customers moved, and how theyexperienced the feeling of movementnot just how they looked.³¹ For example, research from the labdiscoveredthat"twowomenwitha36Cbrasizeexperienceddifferentbreastmotionastheymoved."AsaresultofitsScienceofFeelapproach,thecompanyhadabroadspectrumofbrassuitedforeachcustomer'smovementpatternandpersonalpreferencestoprovidehighlycustomizedproductrecommendations.³²

One of the innovative products that came out of the Whitespace lab was the Enlite sports bra. Whitespacediscovered that women were looking for a bra that felt as if it was barely even there. Therefore, thecompany dedicated over two years to developing a bra to meet unmet needs by reducing seams, hardware,and layers. On May 2, 2017, after over two years of development, the company launched the Enlite sportsbra ($98). This revolutionary bra could embrace breast movement and, particularly, could restrict themovementthatcauseddiscomfort.Thecompanyshiftedthelongstandingideaoflimitingbreastmovementduringexercisetoembracingit.³³

SourcingandManufacturing

Tocutproductioncosts,Lululemonneitherownednoroperatedanymanufacturingfacilities.ThecompanyhadintentionallymaintainedcontractswithafewproductionfacilitiesinNorthAmericatorespondquicklytochangingtrendsandincreaseddemandinNorthAmerica.³⁴However,itdiversifieditsglobalsupplybaseto keep supply chain flexibility and speed. At the end of FY 2020, Lululemon worked closely withapproximately 65 suppliers. The company's top five fabric suppliers produced 65 per cent of its fabrics in2020;about45percentofitsfabricsoriginatedfromTaiwan,18percentfrommainlandChina,16percentfromSriLanka,andtheremainderfromothercountries.Tomanufactureitsproducts,Lululemonreliedonabout 40 vendors, five of whom produced 59 per cent of its products, with the largest manufacturerproducing 17 per cent.³⁵ Suppliers in Vietnam manufactured approximately 33 per cent of all Lululemonproducts in 2020, followed by those in Cambodia at 20 per cent, Sri Lanka at 12 per cent, mainland Chinaat 7per cent,andTaiwan at2 percent.Duetocongestion inAsianports,thecompany graduallyincreaseditsuseof pricier airfreightto getits productstomarket.³⁶

StoreStrategy

Founder Wilson was adamant about the vertical retail model, stating, "I don't think department stores cando justice to thetechnical aspects of the line. . . . I don't think they can train staff." ³⁷ Accordingly,Lululemon sold its products almost exclusively at Lululemon stores and on its website, without relying onwholesalers. In April 2019, the company unveiled plans to open four different types of stores: temporarypop-upstores;279-square-metre(3,000-square-foot)stores;roughly511-square-metre(5,500-square-foot)stores; and massive 2,323-square-metre (25,000-square-foot) stores.³⁸ The company opened many pop-upstores to test relatively unknown and unproven markets and remove excess inventory, even though itsgrowthstrategyalsoincludedopeningmoreandbiggerstores,especiallyintheAsia-Pacificregion.³⁹

Most notably, Lululemon launched several store innovations to better engage with customers and improvetheir in-person shopping experience. For example, to provide a different experience for men, Lululemonopened men's-only stores in Manhattan's Soho neighbourhood in New York in November 2014 and onToronto's trendy Ossington Avenue in December 2016.⁴⁰ The company quietly closed these two men's-onlystoreslater,leaningmoretowarda"co-located"strategytodrivegrowth.Ratherthanhavingseparatemen's and women's stores, the company decided to increase store sizes from 280 to 510 square metres toaccommodatebothmen'sandwomen'sdepartmentswithineachstore.AsofApril2019,about40percentofmen's sales camefrom"women buying formen."⁴¹

On top of that, the company had grown its store fleet with a "multi-concept approach" that was less aboutprofitandmoreabouttestingnewideas.⁴²InJuly2019,thecompanytesteditsgender-neutral"experientialmegastore" concept by combining physical and social experiences that could not be offered digitally. Thatmonth, it opened its biggest store ever in Chicago's Lincoln Park neighbourhood, an upscale urbanresidential community for affluent young professionals and families. With over two floors, the 2,323-square-metre(25,000-square-foot)experientialstorefeaturedconciergeservices,arestaurant(wherecustomers could have beer, wine, juice, burgers, or a salad), locker rooms, workout studios, a meditationroom, and a community gathering place.⁴³ According to Ron Friedman, a retail expert at consulting andaccountingfirmMarcum,innovationsinbrick-and-mortarstoreswereessentialtoensuringthatshoppersespecially millennials (born between 1981 and 1996) and Generation Z (born between 1997 and 2012)wouldgetbacktostoresandbrowselonger,despitetheirincreasedonlinespending.⁴⁴Lululemonsaidthat,by2023,about 10 per centofitstotalstoreswouldbeconsideredexperiential,like theChicago store.⁴⁵

Moreover,thecompanyexperimentedwithalocal,"fashion-forwardapparelconcept"thatwashyperlocal,or specific to the city where it was located.⁴⁶ Back when the company had debuted a new store called theLululemonLabinVancouver'sGastownin2009,thislocationsoldthecompany'sluxurystreetwearbrandandtesteditsmostinnovativeandnewdesigns.TheLabstore,whichlookedlikeafashionboutique,servedasaretailspaceforshoppersandasadesignincubatorforin-housedesignersandtailors,whowerehardatwork.⁴⁷Fromthenon,thecompanyopenedtwomorelabsinNewYork,andtheNewYorklabcollectionswere quite different from the Vancouver collection.⁴⁸ However, after piloting this new concept store for adecade,Lululemonquietlyclosed its LululemonLab locationinGastown, Vancouver.⁴⁹

GrassrootsCommunity-BasedMarketing

Lululemontookadisciplinedtest-and-learnapproachtoopeningnewstoreswhilealsoadoptingashowroomstrategy. ⁵⁰ Beforelaunchingafull-fledgedstoreinanewmarket, the companytypically operated a showroomasmaller-scalepilotstorewithreducedinventoryandfeweropeningdaysasastrategicwayoftestingthewatersforitsproductsandintroducingitselftoanewmarket.Onceitopenedfull-fledgedstores,thecompanydoubleddownonconcertedeffortstoincreasebrandawarenessandbuildcustomerloyaltyinlocal communities. ⁵¹ For example, it pursued a multi-faceted community-based marketingstrategy that leveraged local teams and ambassadors, digital marketing, social media, in-store community boards, andvariousgrassrootsinitiatives.Theambassadorprogramwas"thecompany'sNo.1marketingtool,awaytoreach communitiesin an authenticway withoutblowing money on expensive endorsements." ⁵²Local ambassadors,whowerecommunityinfluencerssuchasyogateachersandfitnessinstructors,promotedthebrandandspreadthewordintheircommunitiesinreturnforperkslikefreeLululemonclothes.⁵³

Nevertheless,asLululemonfacedstiffercompetitionintheathleisuremarketinthemid-2010s,itstartedtoboost its marketing budget to launch mass advertisements and use celebrities for endorsements.⁵⁴ In 2016,the company launched the Here to Be program, a community-based social impact program that supportednon-profitorganizations withgrantsto spreadthehealingbenefits ofyoga andmeditation.⁵⁵

PricingStrategy

Lululemonadoptedapremium pricingstrategy.Forexample,ittypicallychargedabout20percent higherforapairofbasicyogapantsthanGapInc.'sAthleta.⁵⁶Wilsononcesaid,ofthecompany'spricingstrategy,"I recently saw a documentary about Steve Jobs, where he said something along the lines of: 'Make thempay full price, make the best in the world, and the best will come.'"⁵⁷ Apparently, Lululemon's productswere among the most profitable in the athletic apparel industry. For example, Lululemon enjoyed grossmargins ranging from 49-57 per cent between 2016 and 2020, higher than those of Nike, whose grossmarginsrangedfrom37-46percent.⁵⁸

Although Lululemon had long eschewed the practice of offering discounts on its products, it added someoverstock items to a "We made too much" sale section, which offered discounts as high as 50 per cent.⁵⁹Accordingtothecompany'se-commercewebsite,pricingvariedbycountry.⁶⁰Forexample,theAlignPantselling for $98 in the United States (approximately 677)⁶¹ was being sold at 850 (approximately $123)inChina's e-commerce market, Tmall.⁶²

E-commerce

In April 2009, Lululemon launched its first e-commerce website, which constituted its direct-to-consumerchannel,tosupplementitsrapidlygrowingstorebase.⁶³Withitsagilestoreformats,thecompanyadoptedthebuyonline,pickupin-store(BOPIS)modelasanomnichannelretailstrategyin2019.Customerscouldorderonline and pick up their orders within a two-hour window. The company also launched curbside pickup atselect locations during the COVID-19 pandemic. These new initiatives were intended to integrate thecompany'sdigitalandphysicalchannelstoenrichitsinteractionswithcustomersandprovideanenhancedomni-channelexperience.⁶⁴ LululemonsawitsdigitalsalesgrowexponentiallyaftertheCOVID-19pandemiclockdowns.Asconsumersspentmoreonline,thecompanyreporteda101percentgrowthinthiscategoryinFY2020,althoughrevenuesfromitsbrick-and-mortarstoresdeclinedmorethan33percentyearoveryear.Thatsameyear,Lululemon'se-commercebusinessaccountedfor51.9percentofitssales.⁶⁵

TRANSFORMATIONANDGLOBALIZATION ASTHETWOENGINESOFGROWTH

MovingbeyondSlimWomen'sStretchyYogaPants

Sinceitsfoundingin1998,Lululemonhadexpandedintoadjacentcategoriestoattractnewcustomersandthusfuelitsgrowth.InSeptember2009,itlaunchedIvivva-brandedstorestooffersportyleggingsandtanktops for young girls. The focus on a young demographic was short-lived, as in 2017, Lululemon beganwinding down its underperforming kids' business to direct investments toward its men's and internationalbusinesses. By 2020, the company had closed all its Ivivva stores, even though the kids' segment of theathleisuremarketwas valued at $12 billion (see Exhibit3).⁶⁶

Lululemon did not want to establish itself as merely a women-focused brand. Instead, it sought to growoutside of its core market of slim women by moving beyond just yoga pants and leggings. In early 2013,the company saw menswear as an enormous growth lever. Not surprisingly, questions were raised as towhether the company would need to change its name or logo as its brand resonated more with femalecustomers than did any other major brand.⁶⁷ Lululemon decided to keep its brand name and logo. TheVancouver-based company launched its first men's line in 2014 by developing versatile products that mencould use for various activities in their lives, such as exercising, eating out, and travelling. The line alsoofferedbusinesscasualoptions,suchastheABCpants.Asitturnedout,therewasamultibillion-dollar

sales opportunity in the men's market. In FY 2020, Lululemon's men's business achieved $0.95 billion inannual sales, making up about 21.65 per cent of its revenue. However, CEO McDonald wanted to see themen'sbusinessaccountfor50 percent ofthe company's revenue.⁶⁸

Not only did Lululemon want to become more inclusive, but was also looking to expand beyond athleticapparel. In August 2017, Lululemon invaded a footwear market dominated by Nike and Adidas to provideboth female and male customers with complete outfits for their sweaty pursuits. Specifically, the companypartnered with Los Angeles-based fashionable sneaker maker Athletic Propulsion Labs (APL) to startselling APL shoes in its stores. These shoes were priced from $140 to $200 a pair and were sold in selectcities across the United States. After testing and learning how to sell shoes in its own stores, Lululemonannounced in April 2019 that it would venture into footwear with Lululemon-designed, comfortableshoes.⁶⁹ Its stretch to shoes was sensible because it could bring its successful design approach to clothinglike sports bras to its customers' feet. And yet, this move could bring new challenges to Lululemonsuchas supply chain complexity, increased competitive pressure, and lower margins than athletic apparel.⁷⁰Furthermore,thecompanywantedto"beefupitsaccessoriesbusiness"byofferinglower-priceditemssuchas bags, socks, underwear, yoga mats, and equipment to attract younger consumers. The company alsointroduced "some higher-priced items, such as a $598 insulated parka."⁷¹ In June 2019, the companyventured into the self-care category with four gender-neutral productsdry shampoo, facial moisturizer,deodorant, and a lip balmto take a greater share of its customers' wallets by solving their post-workoutproblemsand complementing its existing products.⁷²

In June 2020, the athleisure giant entered the at-home fitness equipment market through its $500 millionacquisition of Mirror, an interactive at-home fitness start-up that sold a $1,495 tech-enabled mirror forstreaming live or on-demand classes at home. Lululemon's first acquisition was bolstered by the COVID-19 pandemic, which forced gyms and fitness studios to close their physical locations.⁷³ With its morediversified product portfolio, Lululemon was looking to create a whole ecosystem around health andwellnesswhiletransformingitselffromanapparelcompanytoahealthandwellnesscompany.⁷⁴However,the acquisition also put pressure on Lululemon's short-term earnings; Mirror directly competed withPelotonInteractive,anincumbentthathadasignificantadvantageintheconnectedfitnessmarket.⁷⁵

InSeptember2020,Lululemonenteredtherapidlygrowingmulti-billiondollarplus-sizeapparelmarketaspartofitsconcertedefforttobecomemoreinclusive.⁷⁶TheaveragedresssizeamongAmericanandEuropeanwomen was between 16/1X and 18/2X at the time.⁷⁷ For more than two decades, however, Lululemon hadshunnedplus-sizedwomenonlyofferingwomen'sappareluptoUS/Canadasize14/XXLtoprotectitsbrand, which catered to fitness-conscious women. However, this changed in September 2020, when thecompany formally announced its plans to become a size-inclusive brand by selling six of its most popularstylesinsizesaslargeas20/3X.Theabout-facecameatatimewhenitsrivalsNike,Fabletics,andVictoria'sSecrethadalreadycommittedtotheplus-sizemarketandjustafewmonthsafterplus-sizespecialistretailerssuch as Lane Bryant Inc. and Catherines had filed for bankruptcy.⁷⁸ Apparently, this long-overdue movetoward size inclusion marked a significant shift from 2013, when founder Wilson infamously said in aBloombergTVinterviewthatLululemonyogapantswerenotsuitedforwomenwhosethighsrubbedtogether.Regardingthosewomen,hetoldtheCalgaryHeraldin2005thatbecausecreatingplus-sizeclotheswouldtake30percentmorefabric,itwouldbea"moneyloser"forthecompanytomakewomen'sapparellargerthanasize12/XL,whichwasitslargestsizeatthetime.⁷⁹

Althoughthecompanyhadsmallsportswearlinesintennis,golf,cycling,andswim,itwasnotconsideringexpanding to sell clothing designed for baseball, football, hockey, or soccer, where the likes of Nike andUnder Armour Inc. (UnderArmour)hadremained so dominant.⁸⁰

GlobalStretch: Lululemonhadgrowngloballybysellingitshigh-pricedproductsandhealthierlifestyleimagetothesamesetofcustomersinnewlocations.Shortlybeforeherdepartureattheendof2013,then-CEOChristineDaylaidoutthecompany'scautiousexpansionintoAsia-PacificandEurope. ⁸¹ Between 2014 and 2019,Lululemonslowlyandsteadilyexpandeditspresenceinmorecountriesbyenteringtwoorthreecountriesperyear. By the end of FY 2020, Lululemon had 521 company-operated stores spread across three geographicregionsNorthAmerica,Asia-Pacific,andEuropewith144ofthoselocationsin16countriesoutsideofNorthAmerica(seeExhibit4).WhilethecompanywasprofitableinNorthAmerica,mainlandChina,Asia(excludingmainlandChina),Australia,andNewZealand,itanticipatedbreakingeveninEuropeattheendofFY2021.⁸²ThecompanyalsohadlicenseeagreementswithpartnersintheMiddleEastandLatinAmerica.Notsurprisingly,notallthoselocationswouldbeequallyattractivedowntheroad(seeExhibit5).

NorthAmerica: OnFebruary1,2002,LululemonhadonestoreinVancouver'sKitsilanodistrict.Overthenextfewyears,itopenedfivemorestoresinlargecitiesinCanada,includingTorontoandCalgary.⁸³ThecompanyeventuallygrewbeyonditshomebaseofCanadabyenteringtheUnitedStates,whichwastheworld'slargestsportswearmarket.Atthetime,Americansspentapproximately$3billionannuallyonyogagearofwhich$50millionwas spent on clothing. In July 2003, the company opened its first US store in Santa Monica, a coastal citywestofdowntownLosAngelesinCalifornia.Lululemon'sthen-CEO,RobertMeers,saidthattheUSmarketcouldhandlearound300stores.⁸⁴AfterLululemon'sforayintotheUnitedStates,GapInc.,Victoria'sSecret,andLizClaiborneInc.soughttoacquirethecompany,butdidnotsucceed.⁸⁵Aroundthattime,thecompetitionwas heating up in the rapidly growing women's athletic market, where US consumers preferred morefashionablelooks.⁸⁶TogrowitsstorebaseintheUnitedStates,Lululemonhadaddednewstoresinbigcitiessuch as Los Angeles, San Francisco, Seattle, New York, Boston, and Chicago.⁸⁷ As of 2020, Lululemonoperated18retaillocationsinNewYork,oneofthemostattractivecitiesforfashionretailersalongwithParis,London,Milan,Tokyo,HongKong,Seoul,andDubai,amongothers.

Lululemon was heavily dependent on the US market: about 71 per cent of its worldwide sales were in thatmarketbytheendofFY2020(seeExhibit1).However,thecompanyfounditselfinanincreasinglyfraughtcompetition. For example, since March 2012, Lorna Jane had been expanding its footprint in the UnitedStates.Thecompany,whichwasAustralia'slargestwomen'sactivewearbrand,operated31storesthereasof February 2019, with a particular focus on the West Coast.⁸⁸ Founded in London in 1998, the luxuryBritishwomen'sfitnessbrandSweatyBettyoperated12USstoresinearly2020,afteropeningitsfirstUSstoreinNewYork'sSohoneighbourhoodinAugust2013.⁸⁹Lululemonwasrunningoutofroomtoexpandin the United States, where it had exhausted almost all of the prime sites in affluent neighbourhoods.FortunatelyforLululemon,however,manyretailerswereforcedoutofprimelocationsduringtheCOVID-19 pandemic. In regards to further expansion across the United States, CEO McDonald said, "We mayadjust slightly, but there's still enough room for growth."⁹⁰ As Lululemon was close to saturation in theUnitedStates, it would needto findfar lessmaturemarketsto fuelits continuedgrowth.

Asia-PacificRegion: InOctober2004,LululemonformedajointventurewithMelbourne-basedNewHarbourYogatomakeitsfirstforayoutsideofNorthAmerica,intoAustralia.Australiawasanaturalchoicepartlybecauseitsclimatewas quite similar to that of California, into which the company had just expanded, and partly becauseVancouver'sactiveandoutdoor-orientedlifestylewasdeeplyingrainedintoAustralianculture.⁹¹ByMay

2010,thecompanyhadreachedatippingpointinAustralia,operatingninestores,increasingitsequityfrom

13.0 per cent to 80.3per cent, and anticipating a 25-store business. ⁹² Despite its continued growth,Lululemon's 31-store presence in Australia was eclipsed in 2020 by the power and popularity of LornaJane, Australia's largest women's activewear brand. Founded in Brisbane in 1990, Lorna Jane was a well-loved Australian company that operated 108 stores on its home turf as of December 2020, down from 144in 2014.⁹³ Lululemon was planning to expand its retail footprint in Australia and intensify its battle withLornaJane, whichhadbeen forcedtoscale back dueto highrental costsin Australia.⁹⁴

Notably, Lululemon wanted to develop a strong presence in Asia, where there was a robust appetite forWestern brands.⁹⁵ In 2005, Lululemon opened a store in Tokyo, Japan, where founder Wilson had sold afranchise to his long-time Japanese friend and colleague, Kano Yamanaka. Wilson eventually bought outYamanaka'sfranchiseagreement,andthecompanyestablishedthejointventureLululemonJapanInc.withDescente Ltd., a Japanese leader in apparel. By late 2008, however, Lululemon decided to discontinue itsoperationsthere.ByearlySeptember2014,Lululemonhad sevenshowroomsinAsia:fourin HongKong,twoinSingapore,andoneinShanghai.⁹⁶OnDecember14,2014,thecompanyopeneditsfirstfull-fledgedstore in Asia at ION Orchard in Singapore.⁹⁷ The move was driven by the overwhelming response ofLululemon'sSingaporeancustomerstoeventsorganizedbyitsexistingtwoshowrooms.Thecompanythenopened its first stores in Hong Kong in 2015; in Seoul, South Korea, in 2016; in Beijing, China, in 2016;andin Tokyo,Japan, in2017(see Exhibit4).

Mainland China, which represented the fastest-growing market for the company, could have been the keyto its successful global expansion strategy for three reasons.⁹⁸ First, China's yoga industry was growingthree times faster than the United States, even though Lululemon would face stiff competition from bothits rivals Nike and Adidas and local brands offering cheaper alternatives.⁹⁹ Second, online users in Chinanumbered 772 million, and roughly 13 per cent (104 million) of these users had at least one fitness mobileapplication (app) on their smart phones, with higher penetration of around 20 per cent in Tier 2 cities.¹⁰⁰Third, China had about 400 million millennials (born between 1981 and 1996), five times the number ofmillennials in the United States. Born during China's one-child-policy period, these Chinese millennialsweresuperconsumers wholovedluxury brands.¹⁰¹

In2013,thecompanysoftlaunchedintothismarketbyopeningitsfirstshowroominShanghai.Thecompanyalsoadoptedadigital-firststrategybybeginningtosellitsproductsviaitsflagshipstoreone-commercegiantAlibabaGroupHoldingLimited'sTmall.com,aChinese-languagewebsiteforbusiness-to-consumeronlineretail,inNovember2015.¹⁰²Lululemon'sofficialbrick-and-mortarstoredebutcameinDecember2016,whenitopeneditsfirstlocationinBeijing'supscaleSanlitunshoppingcentre.ThiswasfollowedbytheopeningofanothertwostoresinShanghaiaweeklater.Sincethen,Lululemonhadexpandeditsstorenetworkbyshiftingitsfocustosecond-tiercities,includingXi'an,Chongqing,Wuhan,Suzhou,andNanjing.

For the third quarter of FY 2020, Lululemon's sales in mainland China increased more than 100 per centcompared to the third quarter of FY 2019far higher than the 19 per cent increase in North America andthe45percentincreaseinoverallinternationalsales.¹⁰³Someofthiswasdrivenbythecompany'spresenceon WeChat, China's top instant messaging and mobile payment app, which was developed by Tencent.¹⁰⁴The company expected sales in mainland China to exceed those in Europe and Australia/New Zealandcombined by 2023.¹⁰⁵ As of FY 2020, mainland China accounted for 30.6 per cent of Lululemon'sinternational store base, and the country was slated to pick up the lion's share of the 40 to 50 newinternational stores Lululemon planned for 2021. However, betting big on China could be risky givenpotential risks, including Ottawa's tangled relations with Beijing.¹⁰⁶ Worse, Chinese customers were notjustbecomingnationalistic;theywereturningmoretolower-pricedhomegrownbrandssuchasMaiaActiveandParticleFever, whoseoutfits werespecifically designedbased ontheir bodyshapes.¹⁰⁷

Europe,MiddleEast,andAfrica Region: Lululemon'sexpansionintoEuropestartedwhentheLondon2012SummerOlympicswasrightaroundthecorner. In April 2012, Lululemon opened its first showroom on the King's Road, in Chelsea, London, oneof the top tourist cities in the world, where it began to compete with Sweaty Betty.¹⁰⁸ After operating inLondon for two years and opening another three showrooms, the company opened a flagship store inLondon'sfamousWestEnddistrictofCoventGardenonMarch28,2014.Assalesatthislocationbeatthecompany'ssalesprojectionsby60percentwithintwoweeks,then-CEOLaurentPotdevinsaid,"Therearemany cities in which the question is not, 'Will we have a store,' but 'When will we have a store?'"¹⁰⁹ Bytheendof2020,Lululemonhad10storesinLondonandwasgraduallyexpandingoutsideLondontoothercities, including Manchester and Edinburgh.¹¹⁰ Thanks to this store expansion strategy, Lululemon's salesin the UK market increased 38 per cent, to 40.8 million¹¹¹ ($54.5 million), in FY 2018 compared to FY2017.Its netincomejumped 42per centto 1.2million ($1.6million).¹¹²

Germanywasasignificantgrowthopportunityforthecompany,aswastheUnitedKingdom.InSeptember2015, after running a few showrooms since September 2013, Lululemon opened its first German store inHamburg. Instead of building critical mass in Hamburg, the company subsequently opened stores in othermajor citiessuch as Munich in October 2017, Berlin in March 2018, Frankfurt in May 2018, andDsseldorfinAugust2019overthenextfouryears.¹¹³FrancewasalsoanimportantEuropeanmarketforLululemon; the company opened its first showroom in Paris's fashionable Marais district in September2015.¹¹⁴Lululemon'sfirstParisianstoreopenedthereafter,inAugust2018.Inthefollowingyear,itopenedtwo more stores in the world's top fashion capital.¹¹⁵ While Lululemon had expanded into other Europeancountries such as Sweden, the Netherlands, and Norway, low brand awareness was one of the greatestconcernsforthecompanywhen expandingfurtherinEurope(see Exhibit4).¹¹⁶

Meanwhile,LululemonexpandedintotheMiddleEastinJanuary2015byallowingDubai-basedMajidAlFuttaimtooperateasmanyas15-22licensedstoresintheUnitedArabEmirates(UAE),Kuwait,Qatar,Oman,andBahrainoverthenextfiveyears.InSeptemberofthatyear,itopeneditsfirststoreattheMalloftheEmiratesinDubai.AsofJanuary31,2021,LululemonhadthreelicensedstoresintheUAEandoneinQatar.¹¹⁷

LatinAmerica: A year after making its first showroom debut in the luxurious Polanco neighbourhood in Mexico City in2017, Lululemon opened its first Latin American store in Mexico City. This store was not company-operated but instead formed in partnership with Grupo Exalta.¹¹⁸ As of January 31, 2021, Lululemon hadfourlicensedlocationsinMexico.¹¹⁹

LOOKINGAHEAD

Thinkingbackto2016,then-CEOLaurentPotdevinhadsetambitiousgoalsforLululemon:tohit$4billionin total sales and do up to 25 per cent of its sales, or $1 billion, outside of North America by the end of2020.¹²⁰ByFebruary1,2021,Lululemonhadsurpassedthe$4billionmarkbyconqueringNorthAmerica.However, it had fallen far short of its other goalinternational sales had amounted to only $624 million,or 14 per cent of its total sales. Calvin McDonald, the current CEO of Lululemon, set a more ambitiousgoal:toincreaseinternationalsalesto50percentinthenot-too-distantfuture.Atthatpoint,someindustryobservershadevensaid thatLululemoncould be"thenextNike."¹²¹

Abigquestion,though,washowfarLululemoncouldgrowoutsideofitshomeregion.Tothatend,the

$4.4 billion company was looking to expand its footprint in China, Asia-Pacific, and Europe. A newexecutive vice-president of international, Maestrini, was looking to execute the "Power of Three" growthstrategy, which aspired to quadruple its 2018 international revenue of $360 million to reach $1.44 billionininternationalrevenueby2023.¹²²AstheVancouver-basedretailercontinuedtoadvanceonitsshort-andlong-term goals in 2021, Maestrini had to think hard about its store network in each of its three majorinternational markets thisfiscalyear andgoing forward.