From the outside, it looks like any other nondescript warehouse-style building with a view of the mountains on a clear day. But it's what goes on inside that sets it apart from your average corporate headquarters: The halls are filled with fit, hip staffers in their 20s and 30s, outfitted in bright-coloured tank tops and snug-fitting stretch pants, and rushing to meetings in flip-flops and runners. Stroll through the on-site workout room, filled with yoga mats, free weights and exercise balls, and you might overhear the company's community relations manager discussing a marketing idea while breaking a sweat on a stationary bike. Take a seat on the worn red couch in the open-concept lobby—cluttered with bicycles, backpacks and unopened boxes—and you could catch employees exchanging comments about Stephen Covey's The 7 Habits of Highly Effective People, one of the self-help business titles stocked in the staff library. And wander up and down the stairwells of the three-storey building, and you'll get glimpses of the dreams and aspirations of every employee: Sheets of paper dot the walls, listing short- and long-term personal, health and career goals. Some pledge to read and work out more often, while others, including company founder Dennis (Chip) Wilson, promise to get home to their families before dinner.
Welcome to Lululemon Athletica, the company behind one of the hottest initial public offerings in Canadian history. Not only did the stock soar after opening on the Toronto Stock Exchange in late July at an initial trading price of $28.99, touching a stunning $56.61 in October, but its mind-body-connection corporate mantra had the Street hooked.
It's not just a retailer, "it's a mass cult," raved Jim Cramer, host of CNBC's Mad Money, who appeared with a Lululemon headband wrapped around his mostly bald head during one of two televised plugs he gave the trendy, Vancouver-based activewear chain this fall.
It isn't just Wall Street waving the flag. Svelte celebrities such as Madonna, Brooke Shields and Sting are part of the following, as is the sworn-to-clean-living Paris Hilton, who was spotted stocking up on Lululemon gear in Toronto just weeks after being sprung from a California prison.
When he isn't doing yoga, or dashing up Vancouver's Grouse Mountain, company founder Chip Wilson finds time to do a shift at a Lululemon store each week (Eydis Einarsdottir)
That kind of buzz, alongside the company's own grassroots marketing campaign, has turned Lululemon from a one-store operation (launched in 1998) into an international retailer with 78 stores, including 37 in Canada, 34 in the United States, four in Japan and three in Australia.
But the thriving chain isn't finished yet. It's planning to open another 30 to 35 stores in 2008 and has set a goal to roll out an additional 200 to 300 stores, the bulk of which are planned for what the company sees as the underserved U.S. market.
So far, the expansion plans are on track, although by late October, industry watchers, including the voluble Cramer, were beginning to wonder whether the company—and its stock—could maintain the feverish momentum. When the share price dipped below $50 (U.S.), the Mad Money host recommended that shareholders start cashing out: "Don't be slaughtered, take the gain," he told investors. Goldman Sachs Group analyst Margaret Mager, meanwhile, downgraded her rating on the shares from "buy" to "neutral," saying they're overvalued. Given the failure of many Canadian companies that have tried to make it in the notoriously cutthroat U.S. retail market, investors can't help but bite their nails as they wait to see if Lululemon can clear the same hurdles without stumbling.
Lululemon's philosophy is a mix of healthy living and warm, fuzzy concepts such as the Law of Attraction, a belief that your thoughts determine your destiny, and a similar movement called The Secret, recently made famous by Oprah Winfrey.
Wilson says those beliefs are behind his company's success, telling analysts in the company's first earnings conference call that the principles reflected in his products helped attract "incredible people" to Lululemon. "And then I think what's resulted out of that is phenomenal profits. That attracted capital investors and even better management, and then created even better cash flow." It sounds simple, but there's more behind Lululemon's success so far than the power of positive thinking.
Wilson, 52, who was born in San Diego and raised mostly in Calgary, may have been genetically predisposed to launch a line of recreational wear: His father was a gym teacher and his mother a seamstress. He originally tried veering from the family career history by going to university to study dentistry, but wound up taking economics instead. After graduation, he took a job as a land-lease negotiator for the now defunct Alberta oil and gas firm Dome Petroleum, but a passion to make pants never left him.
