Lululemon Case Study, Study notes of Yoga

Download Lululemon Case Study and more Study notes Yoga in PDF only on Docsity!

The Power of

Community and

Collaboration

C A S E S T U D Y | D E C E M B E R 2 0 1 9

MOHINI JAGGAN & MELODY MANCINI

C M P W 7 1 7 - R E P O R T W R I T I N G

L U L U L E M O N A T H L E T I C A

Table of Contents

A message from Calvin McDonald, CEO......

3

The Problem..... 4

Community and Core Values..... 5

Our Response....^6

7

8

9

Our Strategy....

The Results....

Moving Forward....

The Problem

Photo taken from the inside of a guest's leggings

In March 2013, we began to receive complaints from our guests that our leggings were too sheer and not providing enough coverage. On March 16, 2013, we recalled a portion of our black Luon bottoms. The affected items comprised 17% of all our women’s bottoms. While the ingredients and quality of the leggings didn’t change, an oversight in our product testing process led to a batch of our Luon leggings being too sheer for customer use.

Our popular pants are made of Luon, a fabric exclusive to our brand and made up about 30% of the fabric used in our products. Since 2004, we had been reliant on one company to produce Luon for our products, which posed an unforeseen risk to the coverage of our leggings. After a thorough examination of our manufacturing process, we discovered that our testing protocols were incomplete and outdated.

Community and Core

Values

Having spent years developing a community with our guests, we understood that we needed to acknowledge that something was wrong. Lululemon was founded on the core values of creating quality product for our guests, and that has been a value that has never wavered.

For the company to move forward from this incident and grow, we knew that we would have to work hard to give our community the quality items they expected and deserved. We welcomed guests concerns and engaged with our community to ensure that we were doing everything could to make things right.

Our Strategy

GRAND TOTAL^ $^150 ,^000.^00

Despite our loss in shares, we wanted to put our guests first by honouring our promise to deliver quality products. Once we became aware of the situation in the beginning of March, we immediately conducted an investigation that resulted in the recall on March 18. Our guests were offered full refunds or exchanges for the affected bottoms.

After discovering the source of the issue, we improved our testing process to include stricter specifications around the production of Luon. We carried out 15 tests targeting different ingredients from pillage to modulus. The refined leggings received two iterations of adjustments to enhance the design and quality were right for our guests. The final product received a tighter tolerance range and a revised pattern. To prevent further defects, we added two additional sources to produce and supply Luon.

Results

After the recall, google searches for Lululemon surged, producing the highest search interest in March 2013. Our stock fell by 8.2% on the New York stock and 5% on the Toronto Stock Exchange, and we estimated a loss of $67 million in revenue. Our fourth-quarter profits which was estimated at US$355-million, dropped to US$343-million. However, we were able to maintain our profits by reassuring our guests that we value the community we’ve created and sustaining this relationship through our brand.

Google trends for Lululemon for the year of 2013

Lululemon stocks for 2013 and first half of 2014