Lululemon’s exposure to international markets
Lululemon Athletica’s (LULU) international sales are a small fraction of its revenue, which was ~6% in fiscal 2015. However, these sales are growing strongly. International revenue grew at a CAGR (compounded annual growth rate) of ~59% over the past five years.
Europe and Asia
Sportswear giant Nike (NKE) is also looking to step into Lululemon’s turf, opening its first women’s store in London last month. LULU already has two stores in London, one of them on King’s Road, Chelsea, a short walk from Nike’s new London store. Lululemon also has more stores in the works for London. Competitors L Brands’ (LB) PINK line, Puma (PMMAF), and Adidas (ADDYY) already have a retail presence in London.
Lululemon also has expansion plans in Europe and Asia. The company is looking at 20 stores each in these regions by 2017, according to CEO Laurent Potdevin. The vertically integrated retailer hopes to earn ~50% of its revenues from these markets over the long haul. The company plans to open new stores in the United Kingdom, Germany, Hong Kong, and Singapore this fiscal year.
Lululemon (LULU) reported strong performance at its showrooms in Germany last fiscal year. The retailer (XRT) (RTH) hopes to open another two showrooms in Sweden this year, according to Potdevin. These showrooms are typically open only part of the week, and they also organize group yoga classes and other community events. Showrooms are a good way for the company to create brand visibility while exploring prospects in new markets.
Potdevin notes that Lululemon is also planning a 17-city tour in 2Q16, which can provide a popular marketing strategy for the brand. It would also leverage the visibility and popularity of its local brand ambassadors.
Middle East thrust
Lululemon also entered into a partnership with the Majid al Futtaim Group (or MAF) in Dubai. One of the largest business groups in the Middle East, MAF is a major retailer and mall developer in the MENA[2. Middle East and North Africa] region. The agreement with LULU covers five countries: the United Arab Emirates, Qatar, Bahrain, Oman, and Kuwait. The first licensed store is slated to open in Dubai in 2H16[3. MAF Group, LULU].