Lululemon 2013 Annual Report Download - page 26

Table of Contents
Our focus on building foundation will also extend to our other categories, including our men’s and ivivva business, where we see potential for
future expansion. We believe our strong cash flow generation, solid balance sheet and healthy liquidity provide us with the financial flexibility to
execute the initiatives which will continue to lead our profitable growth.
Operating Segment Overview
lululemon is a designer and retailer of technical athletic apparel operating primarily in North America and Australia. Our yoga-inspired
apparel is marketed under the lululemon athletica and ivivva athletica brand names. We offer a comprehensive line of apparel and accessories
including pants, shorts, tops and jackets designed for athletic pursuits such as yoga, running and general fitness, and dance-inspired apparel for
female youth. As of February 2, 2014 , our branded apparel was principally sold through 254 corporate-owned stores that are located in the
United States, Canada, Australia and New Zealand and via our e-commerce websites through our direct to consumer sales channel. We believe
our vertical retail strategy allows us to interact more directly with and gain insights from our customers while providing us with greater control
of our brand. In fiscal 2013 , 66% of our net revenue was derived from sales of our products in the United States, 29% of our net revenue was
derived from sales of our products in Canada and 5% of our net revenue was derived from sales of our products outside of North America. In
fiscal 2012 , 61% of our net revenue was derived from sales of our products in the United States, 34% of our net revenue was derived from sales
of our products in Canada and 5% of our net revenue was derived from sales of our products outside of North America. In fiscal 2011 , 53% of
our net revenue was derived from sales of our products in the United States, 43% of our net revenue was derived from sales of our products in
Canada and 4% of our net revenue was derived from sales of our products outside of North America.
Our net revenue increased from $1.4 billion in fiscal 2012 to $1.6 billion in fiscal 2013 , representing an annual growth rate of 16% . Our
increase in net revenue from fiscal 2012 to fiscal 2013 resulted from the addition of 43 net new retail locations, and comparable store sales
growth of 2% in fiscal 2013 , excluding the impact of the 53rd week in fiscal 2012. Our total comparable sales, which includes comparable store
sales and direct to consumer, were 7% in fiscal 2013, excluding the impact of the 53rd week in fiscal 2012. Our ability to open new stores and
grow sales in existing stores has been driven by increasing demand for our technical athletic apparel and a growing recognition of the lululemon
athletica brand. We believe our superior products, strategic store locations, inviting store environment and distinctive corporate culture are
responsible for our strong financial performance.
We have three reportable segments: corporate-owned stores, direct to consumer and other. We report our segments based on the financial
information we use in managing our businesses. While we receive financial information for each corporate-owned store, we have aggregated all
of the corporate-owned stores into one reportable segment due to the similarities in the economic and other characteristics of these stores.
As of February 2, 2014 , we sold our products through 254 corporate-owned stores located in the United States, Canada, Australia, and
New Zealand. We plan to increase our net revenue in North America and Australia by opening additional corporate
-owned stores in new and
existing markets. Corporate-owned stores accounted for 77.3% of total net revenue in fiscal 2013 , 79.6% of total net revenue in fiscal 2012 and
81.6% of total net revenue in fiscal 2011 .
As of February 2, 2014 , our direct to consumer segment included our lululemon and ivivva e-commerce websites. E-commerce sales are
taken directly from retail customers through www.lululemon.com and www.ivivva.com and other country and region specific websites. Our
direct to consumer segment is an increasingly substantial part of our growth strategy, and now represents 16.5% of our net revenue compared to
14.4% in fiscal 2012 and 10.6% in fiscal 2011 .
In addition to deriving revenue from sales through our corporate-owned stores and direct to consumer, we also derive other net revenue,
which includes outlet, wholesale, and warehouse sales and as well as sales through a number of company-operated showrooms and temporary
locations. Outlets as well as warehouse sales, which are typically held one or more times a year, are both to sell slow moving inventory or
inventory from prior seasons to retail customers at discounted prices. Wholesale customers include select premium yoga studios, health clubs
and fitness centers. Our showrooms are typically small locations that we open from time to time when we enter new markets and feature a
limited selection of our product offering during select hours. Our temporary locations are typically opened for the holiday season in markets in
which we may not already have a presence. We reacquired our four remaining franchise stores during fiscal 2011, and as such, franchise sales,
which included inventory sales and royalties, are no longer a part of our other net revenue. Other net revenue accounted for 6.2%
of total revenue
in fiscal 2013 compared to 6.0% in fiscal 2012 and 7.8% of total net revenue in fiscal 2011 .
We believe that our athletic apparel has and will continue to appeal to consumers outside of North America who value its technical
attributes as well as its function and style. In 2004, we opened our first store in Australia which was operated under a franchise license. In fiscal
2009 we made a 13% equity investment in lululemon athletica australia Pty, our franchise operator. During fiscal 2010 we increased our
investment to 80% which provided us with control over lululemon athletica australia Pty. During fiscal 2012 we purchased the remaining non-
controlling interest in lululemon athletica australia Pty. In fiscal 2008, we
21