When we think of yoga apparel, we think Lululemon Athletica (LULU +1.17%). Lululemon been a huge hit not only with consumers, but with investors as well. Furthermore, Lululemon has been one of the top gaining stocks since the depths of the great recession. While America has been swept away by this popular brand, there are still some facts about the company and its founding that you may not know, and these little-known facts have strong implications for Foolish investors considering taking a stake in the company.
The creation of Lululemon
Entrepreneur, businessman, and philosopher Chip Wilson founded Lululemon Athletica in Vancouver, British Columbia. Before creating the well-known yoga apparel brand, Wilson founded and operated Westbeach Snowboard Ltd, which also sold athletic apparel. He ended up selling Westbeach Snowboard in 1997 and started Lululemon the following year. Wilson's inspiration to start Lululemon came out after he received his first yoga lesson. After the lesson, Wilson got the same rush as he would with snowboarding and surfing that he decided more women should experience yoga. The name "Lululemon" actually has no meaning except having three "L's" in the name, which makes it quite unique and distinctive.
Lululemon Shrugged?
Since he was 18 years old, Chip Wilson has had an affinity for Ayn Rand's objectivist philosophy espoused in her novel Atlas Shrugged; so much so that he incorporated her set of philosophies into Lululemon's company values. Strangely enough, Wilson made headlines in late 2011 when he printed the famous quote from Atlas Shrugged "Who Is John Galt" onto the store's shopping bags. While some customers appreciated Wilson's beliefs, others were outraged. For instance, one woman returned her purchase immediately, later writing on the company's blog, "In this political and economic climate, I find it baffling that you would choose such an inflammatory and offensive statement." Wilson responded to the publicity saying, "Our bags are visual reminders for ourselves to live a life we love and conquer the epidemic of mediocrity. We all have a John Galt inside of us cheering us on."
Wilson has some peculiar beliefs
Wilson has often made headlines for his unique beliefs and opinions. For instance, Wilson has publicly said, "The birth control and smoking are the result of higher divorce rates along with more women suffering from breast cancer." Wilson justifies his claim by pointing out that the pill encouraged women to enter the business world and made them feel like a man's equal counterpart. Being in the working world gave women increased power within the household and brought more stress into their lives, leading to cigarette smoking. As a result, husbands and wives filed for divorce more readily. In addition, women's hormone levels were out of whack due to stress, the birth control pill, and smoking, which has caused more women to be susceptible to breast cancer.
Wilson made headlines again when he made the assertion that "Third-world children should work in factories." Wilson, whose Lululemon Athletica produces 70% of its products in factories throughout third-world countries, backed up his statement by arguing that children in these countries can earn better wages that will help them and their families pay for much needed necessities.
Emulation is the sincerest form of flattery
Gap's (GPS 2.69%) Athleta, which also specializes in women's performance apparel, seemingly seeks to emulate Lululemon as much as possible. According to a recent Bloomberg Businessweek article detailing the similarities between the two retailers, the recent pattern by Athleta has been such that once Lululemon opens a store within a mall, Athleta follows by opening a store in that same mall. Athleta prices their performance pants $15 cheaper than Lululemon's pants. Athleta offers yoga classes to customers at all store locations by moving their clothing racks, which are on wheels, to the side walls, unlike Lululemon, which offers yoga classes off-site to customers. Furthermore, Athleta has followed Lululemon's practices by training their employees to act as "educators," explaining products to customers and advising them on the best yoga apparel to meet their needs. Lastly, while Lululemon offers a 15% discount to yoga instructors who advise customers on store apparel, Athleta has become an even greater threat, offering a 30% discount to yoga instructors, and they do not ask the instructors for any advice in return.
The Gap isn't the only company angling for a piece of the yoga apparel pie. In late 2012, Lululemon filed infringement charges against Calvin Klein, which is owned by PVH Corp. (PVH 3.54%), claiming that Calvin Klein's "Performance Pant" is a copy-cat version of the "Astro pant," thus violating the company's design patent. Calvin Klein immediately pulled their Performance Pant from stores and online upon hearing word of the lawsuit. According to Forbes' article on the matter, design patents and intellectual property claims among fashion designers' products are very difficult to justify unless it is a logo which can be trademarked, which made this case so tricky. In the end, Calvin Klein and Lululemon Athletica settled out of court; the pay-outs are unknown.
Foolish Takeaway
Despite the unique views of its founder, Lululemon is clearly an exceptional brand worthy of closer inspection by Foolish investors. Proof of this is in the constant attempts by competitors to emulate Lululemon's products and stores, cashing in on a trend that Lululemon helped to create. As with any business venture there's no telling what the future holds, but for investors considering adding Lululemon to their portfolio, it is clearly a trailblazing, unique organization that will continue to innovate and attract customers.
