After reading Lucy’s blog about Lululemon’s financial situation, I have to say that I agree on her opinions as a whole and also have several additional remarks.
First, should Lululemon takes the risk to expand in such high a pace?
It’s not always a good thing to hold money on hands as we discussed in class that the more cash flows in the income statement shows the lower capability to arrange capital and make investment properly. But, Lululemon seems a little reckless to turn their earnings into “explosive” inventory. The excess retail inventory and poor inventory management will cause depreciation of stocks in a harmful and “invisible” way.
Beyond that, Lululemon should focus more on its leading merchandise such as women sports wear. The new collections for men and children are whether necessary or not will still remain questionable. Recognizing the value proposition is the initial step and then a company can differentiate itself from others. For Lululemon, I am convinced that focus on the preponderant women sports wear department and try to take a broad view to explore more profitable markets.
Second, what should Lululemon improve instead of “ambitious” expansion?
Earlier in the June, Lululemon just recalled 185,000 tops in Canada over drawstring hazard and caused about seven cases of damage when people try to adjust the elastic degrees. After the quality issue, many customers expressed their loyalty as big fans of the brand. However, some of the customers start casting doubts on the quality of its garment. Is there have to be tradeoff between the growth rate and the public reputations?
Sources:
http://blogs.wsj.com/moneybeat/2015/09/10/markdowns-fueled-lululemons-growth-sparking-investor-wariness/
http://bc.ctvnews.ca/lululemon-recalls-185-000-tops-in-canada-over-drawstring-hazard-1.2440408
http://shop.lululemon.com/products/category/women?mnid=mn;CAwomen
