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Heard on the Street Blog

Lululemon Has Built A Huge Direct-To-Consumer Business Since 2016

Lululemon reported another set of impressive sales numbers yesterday, as the company best known for its yoga-pants continues to successfully stretch itself into new markets — sending shares up 10% at the time of writing.

The company has been reaping the rewards of a number of new ventures. Its nascent menswear division grew by some 27% in the recent quarter and their latest endeavor — getting into the shoe market — is likely to add to sales in coming months, as is the at-home fitness product, Mirror, which it acquired for $500m in 2020.

LULU like Nike

With slick marketing and a sometimes cult-like customer base, Lululemon regularly squeezes out some of the best operating margins in the industry — even matching branding giant Nike in recent years.

And that's not where the similarity ends.

Lululemon, like Nike and many other retailers, has increasingly gone after a direct relationship with consumers. The DTC division, which includes online sales, got a significant boost during the pandemic and has held up ever since. Over the last 12 months, Lululemon's DTC revenue has matched the company's store-based sales. With no expensive overheads, those direct sales are much, much more lucrative for LULU.