Lululemon Athletica Discovers the Benefits of Staying Focused

Retail stocks seem to be in a tailspin, the consumer is dead, the
economy is taking it on its chin. But don’t tell that to Lululemon
Athletica (LULU)
which recently announced that sales for its fourth quarter (ending
February 2) were up over 100% compared to last year.<!--more--> Despite what even
the company’s management concedes is a weak retail environment,
expansion continues to be underway as LULU transitions from being a
small Canadian niche player to a broadly accepted women’s sports
apparel authority.

Believe it or not, there are some functions of the consumer slowdown
that benefit the company. As large retailers become cash strapped and
decide to pull back in their expansion plans, LULU, who enjoys a healthy
balance sheet, is able to acquire leases in prime real estate locations
that under normal circumstances would be difficult to procure. Management is intensely focused on “seeding” new markets it enters by
first driving demand through reaching out to local fitness
professionals and gyms to stimulate demand. Once the story has begun
to generate buzz, the company then enters the market with full blown
stores and usually is successful in rolling out the concept and quickly
generating sales.