Summary
This article talks about Lululemon's recent rise in profit. The purveyor of yoga-inspired athletic wear said revenue jumped 14% to $97.7-million from $85.5-million in the same period last year. Despite the profitable second quarter, the sales might have been even higher had the retailer been able to meet unexpectedly buoyant consumer demand. Earnings fell to $9.2-million, compared with $11.1-million, or $0.16 per share, a year earlier. Analyst estimates expected earnings of $0.10 per share before items and revenue of $87.1-million. In an attempt to draw in customers, Lululemon dropped the prices of its top selling yoga mat to $28 from $54, and introduced more apparel items in the price range of $50 to $70. Finally, because of the bad state of the economy, the retailer plans to open only 7 stores in 2009 as opposed to the original plan of 35 stores, in order to save money.
Connections
The connection that this article has with the text has to do with the inventory cycle being critical to economic recovery. Because of the recession, Lululemon should have purchased a more sufficient amount of goods in case customer demand went up. For a large company like them, they also should have known that merchandise sells quickly. This retailer is a business that buys merchandise and sells them to earn profit. Therefore, according to the inventory cycle, they should have renewed their stock regularly to prevent insufficient quantities, no matter whether there was a recession or not.
Reflection
What impressed me the most about Lululemon was that despite the economic crisis and small inventory that they had, they were still able to increase their revenue. I really felt that they made a wise decision by dropping their prices on top selling goods to attract customers, and yet still make good profit by doing so. Another thing that impressed me was their prudent decision to open 7 stores in 2009 instead of 35 which would save them a lot more money in the future. Last but not least, despite the recession this year they still earned more profit than last year when the economy wasn't nearly as bad. That just goes to prove they did exceed expectations, although unexpectedly. Finally, it also shows that Lululemon is a very successful company.
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I totally agree with Theodore. I think that it is very impressive how Lululemon was able to increase their revenue during the economic crisis we are in. It is amazing how they made more profit than last year during this hard time. It was brillant and intelligent decision to drop the prices of their product.The dropping of the prices will still help them to make a profit, but once the economic crisis is over, if they try to bring back the original prices the consumers may be really repelled to this. In conclusion, I truly think that Lululemon will continue to run with great success with the wise decisive decisions they made for the company.
ReplyDeleteIt is interesting how Lululemon managed to increase their revenue by such a large percantage even during this recession.It is also impressive that the company managed to do this with a small inventory.I think that dropping the prices of their products to attract customers was a very wise descision. Their other descision of holding back on opening new stores is also a smart move. It would be risky to open 35 new stores during this economic recession. By holding back, their sales reports could offer insight on what to do next.I think that this company would be very successful if they continue to make descisions like this.
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