On August 28th, 2010, I submitted the following ‘tweet’ in my Investbyads’ Twitter account:
At Lululemon's store yesterday. Great consumer experience. More to come on LULU.
I never got to write the article I intended to on Lululemon Athletica (LULU). At that time, the share price for LULU was $32. Yesterday it closed above $70.
Of course I could continue kicking myself for not following my own advice (refer to my Instablog posting “Investing by Advertising”). But I’d much rather explain what I think is so right about Lululemon’s consumer experience and why I believe it is not too late to invest in this superb retailer.
During a business trip back in August, a couple of business partners and me were killing some time strolling in a commercial area in San Diego; suddenly, one of my female colleagues stopped on her tracks and excitedly pointed to a Lululemon store across the street. I had started to watch LULU several weeks before, due to the reasons I’ll explain later. Her excitement was exactly what I love to see when profiling a potential investment. It was genuine, emotionally-charged and, above all, hard to explain. She started raving about how much she likes Lululemon’s apparel, abut their quality, the feel, the fit… everything.
Intrigued, I took the opportunity and encouraged the group to get to the store. The experience was impressive: the layout, the colors, the associates, it all communicated an interesting sense of latent energy. What I found striking was that every single one of the very athletic sales associates was dressing in Lululemon’s apparel. When I inquired about that, each one of the associates I talked to indicated that they were not asked to do it, but they did it because they loved the brand and how it felt. Their own conviction and enthusiasm left little doubt that they were telling the truth… or that they were superbly trained. In either case, each associate was the embodiment of the brand itself.
That is another big check in my list. The brand is not just a label attached to a fine piece of apparel, but it is a living, breathing community of like-minded people. It’s not a piece of apparel you buy… it is a tribe you join and belong to. It is that level of genuine excitement and emotional attachment that in this day and age defines a successful brand.
But yoga apparel? Isn’t that a niche? Or a fad? Not really. Yoga represents the iconic essence of the Lululemon brand. But it is meant to be the emotional space the brand occupies, instead of a constraining functionality in their apparel range. Actually, that day my colleague purchased a very cool –and expensive!- jacket that I bet you wouldn’t wear while practicing yoga.
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Lululemon represents a lifestyle choice, rather than a utilitarian functionality. And a growing lifestyle choice for that matter. This is what not only had me following the stock back then, but what have me convinced that the growth the brand is experiencing –as demonstrated by the recent quarters- will continue.
The brand is at the center of some of the most fundamental trends that are shaping society and consumer behavior: wellness as a total state of being, seeking life balance and the pursuit of a more holistic –and wholesome- lifestyle. By action, by affinity or by aspiration, these are values that are having today a significant influence in what consumers purchase, and to what ‘tribes’ they seek to belong.
Read Lululemon Athletica’s Manifesto - which I highly recommend - and you will be staring at a window into the articulation of these same values. LULU masterfully embodies them and delivers on their experience. Understanding that is understanding the emotionally charged devotion I witnessed in my co-worker, and the underlying drive behind the growth the brand will continue experimenting.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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