Lululemon’s Culture Should Give Investors Pause

Lululemon athletica's  (NASDAQ: LULU  ) corporate culturemay or may not be bad, but it's certainly odd. The oddities have been reported on several occasions and supported by company culture scores at Glassdoor.com. Therefore, Mary Mann's story, written for Salon, is a prime example of what takes place at Lululemon.   

We'll take a look at her interesting story, as well as Lululemon's company culture scores and feedback on Glassdoor. We'll also take a look at two of Lululemon's apparel clothing peers from a company culture perspective. These two peers are Nike (NYSE: NKE  ) and Under Armour (NYSE: UA  ) . Surprisingly, one of them scores lower than Lululemon on Glassdoor. Fortunately, the other scores higher and is steady across the board in regards to employee feedback. 

Searching for Ocean
Prior to reading the information below, I would like to point out that this story was written for Salon. If you would like to read the full story, you can visit Salon.com. This section offers a quick summary of that story. 

According to Mary Mann, a former sales associate at Lulumeon's Union Square location, a Lululemon manager used the name Ocean as a reference to what every Lululemon wanted out of life, which was to perform yoga daily, earn $100,000 per year, and marry a man named Mountain, who would be a triathlete. Of course, this seemed illogical to Mann, especially since Lululemon paid her approximately $15,000 per year and there seemed to be little chance for advancement. 

To add to the strangeness of her experience at the Union Square Lululemon location, Mann describes a culture where she was expected to exercise every day. If not, co-workers would notice and ask what was wrong. While a perk was free yoga classes, those classes were to be attended on her own time. Other interesting aspects of the job included willpower lectures, goal-setting videos, group clothes-folding sessions, and required reading of self-help books.

One day, Mann sat in a lotus position next to her co-workers who formed a circle as if awaiting instructions from their kindergarten teacher. The manager presented news that another educator (what Lululemon refers to as a salesgirl) was murdered in a Maryland store. At the time, it seemed like a botched robbery, but as it turned out, it was an attempted cover-up by the victim's co-worker who apparently committed the crime because the victim knew she had been stealing Lululemon products. 

This was the tipping point for Mann. Rather than attempt to fit into a culture like a disco dancer attempting to party at a line-dancing hoe-down, she mentally prepared for her exit. After being told she didn't quite fit in anyway, she opted to quit, happy to go from yoga and extreme diets back to beer, baked goods, and Russian novels.

Company culture scores
According to Glassdoor.com, Lululemon scores respectably for company culture, with an overall 3.3 of 5.0 rating, and 60% of employees stating that they would recommend the company to a friend. Repeated positive feedback includes management being supportive of goals, discounts on merchandise, and free yoga. The most common negatives are a large time commitment outside of work and young, immature, and inexperienced store managers. These scores indicate that Mary Mann's experience might have been an aberration. 

Surprisingly, Under Armour scores lower than Lululemon on Glassdoor, with an overall rating of 3.1 of 5.0, and only 56% of employees stating that they would recommend the company to a friend. Positives include merchandise discounts, a fun atmosphere, and amazing products. The biggest negative is being overworked and underpaid, which leads to the loss of valuable assets that reach out to competitors. Another negative mentioned more than once was a frat-boy environment.  

Not surprisingly, Nike scored the best on Glassdoor, with an overall score of 3.8 of 5.0, and an impressive 89% of employees stating they would recommend the company to a friend. Positives include caring management, generous medical benefits, stock options, and discounts on merchandise.

That said, if you're looking for growth, then you might want to consider Lululemon: 

UA Revenue (TTM) Chart

UA Revenue (TTM) data by YCharts

If you're more of a value investor in seek of dividends, then you will only find what you seek with Nike, which currently yields 1.20%. 

The Foolish bottom line
Lululemon continues to deliver top-line growth, but the company culture is far from ordinary. Whether this is a positive or a negative has yet to be determined. If you believe in company culture playing a significant role in sustainable success, and you would be content with moderate growth and a decent dividend yield, then you might want to consider Nike instead. 

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Read/Post Comments (3) | Recommend This Article (3)

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  • Report this Comment On January 11, 2014, at 5:47 PM, bubbawubba wrote:

    The hearsay account of one fiction writer who writes a column for "bookslut" according to her own bio on salon.com is hardly enough evidence to justify the title of the article or to use it in any manner to make investment decisions.

  • Report this Comment On January 12, 2014, at 10:25 AM, plange01 wrote:

    lululemons CUSTOMERS are all that matters and they are spending money! culture? who the F cares...

  • Report this Comment On January 12, 2014, at 12:01 PM, LQM2 wrote:

    I agree with the comments above. How could MF conclude anything from an article written by one sales associate? Oh, that's right, the article doesn't conclude anything. Waste of time.

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