Lululemon’s CEO Christine Day last week was named CEO of the year by the Globe and Mail newspaper’s business magazine. Yes, the same Globe and Mail that has run at least one story on the company’s use of the Ayn Rand “Who is John Galt?” quote.
Here’s some of what the mag says:
The success of Lululemon Athletica Inc. (LLL-T50.751.553.15%) has been one of the biggest and arguably most mysterious stories in retail over the past year: a premium-priced product, sold with extensive reliance on feel-good intangibles, flourishing while so many other retailers have flagged. But on a sunny Saturday afternoon in Vancouver, you could pop into any store—the flagship Kitsilano location, for example—and, by doing nothing more than people-watching, easily get a sense of what underscores its success.
Christine Day, CEO since 2008, tends to reinforce this sensibility. She says that she considers Lululemon to be “part of, and contributing to, a bigger macro-trend that affects consumers from their early teens to their 70s. Investing in your health will pay big dividends for individuals and society…elevating the world from mediocrity to greatness.”
But then, what’s interesting about the chosen quote is that it layers an interest in community over a reference to Atlas Shrugged, Ayn Rand’s treatise on the essential shamefulness of being merely like everyone else and the necessity that truly great people strive through all obstacles toward individual dominance. Rand’s 1957 novel is one of the core documents of libertarianism, bear in mind. Yet Day makes no bones about acknowledging the inspiration of the book and the life of its author. “I believe in a culture of personal accountability and not compromising your values,” Day tells me. “Atlas Shrugged is both about not accepting mediocrity and being personally accountable for the life you are creating.”
If you want to know how Lulu has done it, however, don’t bother reading the financial statements. They reflect good numbers, of course: net revenue up 39% in the second quarter to $212.3 million year over year; comparable store sales 18% higher on a constant dollar basis and income from operations up 74% to $59.5 million (both over the same period). But no matter what the numbers say, when a stock is trading at 48 times earnings in the retail sector, something other than arithmetic is involved. This would be yet another contradiction that Lululemon artfully manages to maintain: in this case, a company seemingly devoted to its “guests” that nevertheless refuses to give them exactly what they want.
Lululemon’s expansion, meanwhile, should remain Day’s central concern, Gray argues. “I’m not saying [existing brand features] aren’t important to her, but in terms of day-to-day activities, she has tremendous experience in rolling out a lifestyle brand, and that’s what she was brought in to do.”
Certainly that’s what the analysts seem to think. Although with Day’s remarkable success so far, Edward Yruma of KeyBanc Capital Markets, who follows Lululemon, does not see much upside potential in the stock price; he rates it an underweight. “Lululemon Athletica is one of the best growth concepts in our coverage,” he wrote in a September, 2011, release, “but valuation remains full.” Yruma goes on to say that investors might like to hold off for a better price point before they purchase. In other words: Wait for the inevitable fall.
One gets the feeling that even moderating interest in the stock markets will not deter Day, however. Asked to comment on personal philosophy, she quotes Ayn Rand again: “The question isn’t who is going to let me, it’s who is going to stop me!” I’d say: probably nobody.
I know that’s a big chunk, and I apologize. Check the full story out for more.
Having followed this tale too much — though, apparently, not nearly as much as this person — I think the reason it is fascinating but also so quickly infuriating is that a “yoga brand” isn’t supposed to be about any sort of bottom line. But, in order to be successful, you have to be. (*Cough* YogaWorks *Cough*) If Lululemon weren’t adhering to some Randian philosophy (or if its CEO hadn’t come from Starbucks), none of us would be cradling our butts in its appallingly comfortable and functional pants. Just being good isn’t enough; you have to be good at selling and promoting, too.
And that “me first” attitude certainly runs counter to a pursuit that has at least one foot in a philosophy of dissolving the ego into the whole of the universe.
Think of it as a battle summed up as: Lululem-Aum.
Posted by Steve