Advent initially targeted the performance-apparel sector in 2002 based on our research of increasing healthy living trends and rising consumer disposable income. After learning about lululemon at a convention in 2004, one of our associates cold-called the company and began to track its progress. About six months later, lululemon informed us that it was looking to raise capital. We immediately mobilized resources to position ourselves to be competitive in the process, which included lining up Bob Meers, the former CEO of Reebok, as a potential board member and active advisor.

“When I got to the point with lululemon where we needed assistance at a higher level and Advent came in, the first thing I saw was the quality of people they brought to the table and their knowledge of what it was to be a bigger company,” said Chip Wilson, founder of lululemon. “Within an hour and half of meeting Bob Meers, I knew this guy was amazing. He knew a lot more about the industry than I did, so I said, 'Why don’t you run the company.'”

“When I got to the point with lululemon where we needed assistance at a higher level and Advent came in, the first thing I saw was the quality of people they brought to the table and their knowledge of what it was to be a bigger company.”
Chip Wilson, founder, lululemon athletica
Meers became the CEO of lululemon, while Wilson stepped into the role of chairman and chief product designer. Advent went on to help add key senior managers to build a foundation for future growth and success. With our guidance, new executives were hired from top-notch companies such as Abercrombie & Fitch, J. Crew, Nike and Reebok to fill out the management team, including a new CFO, operations executives, finance, HR and supply-chain positions.

“The key focal point was to recognize that Chip had built a fabulous formula, combining an innovative product, incredibly memorable guest experience, grassroots marketing and unique retail stores,” recalls Meers. “But if lululemon was going to reach its full potential, we needed to divide responsibilities so Chip could focus on the product, and I could focus on the infrastructure to make sure that the supply chain and team were in place to take advantage of the opportunity.”

The next step was to figure out how to accelerate lululemon's growth. “lululemon was a tremendously successful retailer in Canada at the time of our investment, yet it was just beginning to enter the U.S. market,” said Steven Collins, a managing director in Advent’s Boston office. “We assisted the company in recruiting key executives to help it as it expanded across the border.”

“[Advent is] knowledgeable about brokers, leases, specific market penetration, and the conversations we had with them were very valuable in helping us make as few mistakes as possible in this aggressive expansion."
Bob Meers, Advent Operating Partner and former CEO, lululemon athletica
The lululemon team decided growth would come from two areas: geographic expansion and product expansion. Using our global network, we helped the company identify key cities to expand into, including San Francisco, Los Angeles, Colorado, Chicago, New York, Portland and Boston in the U.S.; Brisbane, Melbourne, Perth and Sydney in Australia; and Aichi and Tokyo in Japan. We also assisted the company in formalizing a real-estate selection process and building out its financial and IT systems.

“Advent has a lot of experience in the U.S. retail space,” said Meers. “They're knowledgeable about brokers, leases, specific market penetration, and the conversations we had with them were very valuable in helping us make as few mistakes as possible in this aggressive expansion. They were working with real estate brokers, with retail development, with lease negotiations, with legal assistance and adding value every step of the way.”

The push for growth paid off. Sales increased 50% in each U.S. store from 2005 to 2006, while sales per square foot reached $1,100, second only to long-time leader Coach. In the second quarter of 2007, prior to the company’s IPO, total sales grew 81% over the year-earlier period and same-store sales rose 30%. By this time, lululemon had nearly doubled its store network and was on track to reach 80 stores by the end of 2007.

In tandem with geographic growth, lululemon also focused on expanding its product line. Founded in 1998 in response to the increased participation of women in athletics, the company offered a comprehensive line of yoga apparel. But Advent and management saw a bigger picture. The women’s sports-apparel industry as a whole was growing rapidly and by 2005 was a $15 billion market, 25% larger than men’s active wear.

Lululemon added more sports apparel to its line to reach a wider range of customers, while never compromising its core goal of delivering high-quality premium athletic apparel that incorporates technically advanced materials, innovative functional features and style.

With impressive double-digit growth in this segment and a product designed with women in mind, lululemon was well-positioned to extend its clothing line into women’s fitness more broadly. The company had already built considerable brand equity in the yoga-apparel segment, which itself was expanding quickly. The number of yoga participants in the U.S. jumped more than fivefold from 3 million in 2000 to 16.5 million in 2005. Lululemon added more sports apparel to its line to reach a wider range of customers, while never compromising its core goal of delivering high-quality premium athletic apparel that incorporates technically advanced materials, innovative functional features and style.

The company’s focus on women has differentiated the business and positioned it to address a void in the burgeoning market for women’s athletic apparel. The brand’s high quality is reinforced by selective distribution through yoga studios and fitness clubs, which Advent believes are the most influential within the fitness communities of their respective markets. Lululemon’s retail concept is based on a community-centric philosophy, designed to offer customers an inviting and educational experience.

With a proven business model, outstanding management and strong financial performance, lululemon was an excellent candidate for an IPO. The company went public on Nasdaq in July 2007 and was the third-best-performing flotation of 177 IPOs in the U.S. that year.* We sold a portion of our holdings at the IPO, divested additional shares over the next 12 months and today retain a minority stake in the business. In the four years we have been an investor, lululemon has more than tripled its store base from 36 stores mainly in Canada to 112 stores across Canada, the U.S., Australia and Japan, as of December 2008.

In the four years Advent has been an investor, lululemon has more than tripled its store base from 36 stores mainly in Canada to 112 stores across Canada, the U.S., Australia and Japan.

Building on its solid foundation, lululemon is still reaching new heights. The company plans to continue adding new stores to strengthen its presence in existing markets and selectively enter new markets in the U.S. and Canada. Additionally, it remains committed to introducing new apparel that incorporates technology-enhanced fabrics and performance features, further differentiating itself in the market. For example, the company is developing encapsulation-enhanced fabrics to provide advanced features such as UV protection and temperature control. Lastly, because of its enormous success in women’s apparel, lululemon is exploring opportunities to develop premium-quality products that will appeal to men.

“Advent has been fortunate to be a part of the lululemon story,” said Collins. “Today, the company is one of the freshest and most authentic lifestyle brands focused on the athletic apparel space anywhere in the world.”

^* Source: Thomson Financial – IPOs of stock in the U.S. in 2007, after-market performance through Dec. 31, 2007.