Lululemon 2011 Annual Report Download - page 13

Table of Contents
In addition to the other information contained in this Form 10-K, the following risk factors should be considered carefully in evaluating
our business. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Please note
that additional risks not presently known to us or that we currently deem immaterial could also impair our business and operations.
Our success depends on our ability to maintain the value and reputation of our brand.
Our success depends on the value and reputation of the lululemon athletica brand. The lululemon athletica name is integral to our business
as well as to the implementation of our strategies for expanding our business. Maintaining, promoting and positioning our brand will depend
largely on the success of our marketing and merchandising efforts and our ability to provide a consistent, high quality guest experience. We rely
on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand could be
adversely affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity. Negative
publicity regarding the production methods of any of our suppliers or manufacturers could adversely affect our reputation and sales and force us
to locate alternative suppliers or manufacturing sources. Additionally, while we devote considerable efforts and resources to protecting our
intellectual property, if these efforts are not successful the value of our brand may be harmed, which could have a material adverse effect on our
financial condition.
An economic downturn or economic uncertainty in our key markets may adversely affect consumer discretionary spending and demand
for our products.
Many of our products may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such
discretionary items include general economic conditions, particularly those in Canada and the United States, and other factors such as consumer
confidence in future economic conditions, fears of recession, the availability of consumer credit, levels of unemployment, tax rates and the cost
of consumer credit. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary
spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. The current volatility in
the United States economy in particular has resulted in an overall slowing in growth in the retail sector because of decreased consumer spending,
which may remain depressed for the foreseeable future. These unfavorable economic conditions may lead consumers to delay or reduce purchase
of our products. Consumer demand for our products may not reach our sales targets, or may decline, when there is an economic downturn or
economic uncertainty in our key markets, particularly in North America. Our sensitivity to economic cycles and any related fluctuation in
consumer demand may have a material adverse effect on our financial condition.
Our sales and profitability may decline as a result of increasing product costs and decreasing selling prices.
Our business is subject to significant pressure on pricing and costs caused by many factors, including intense competition, constrained
sourcing capacity and related inflationary pressure, pressure from consumers to reduce the prices we charge for our products and changes in
consumer demand. These factors may cause us to experience increased costs, reduce our sales prices to consumers or experience reduced sales in
response to increased prices, any of which could cause our operating margin to decline if we are unable to offset these factors with reductions in
operating costs and could have a material adverse affect on our financial conditions, operating results and cash flows.
If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products, we
may not be able to maintain or increase our sales and profitability.
Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer
demands in a timely manner. All of our products are subject to changing consumer
10
ITEM 1A.
RISK FACTORS