Lululemon's profit beats expectations

Chapter 11 Blog
http://www.nationalpost.com/story.html?id=1982949


SUMMARY

The article clarifies Lululemon’s profit being exceptionally well compared to other retailers. Despite the recession, Lululemon’s revenue increased from $85.5 million to $97.7 million relative to Reitmans Canada Ltd’s revenue which declined by 2.2%.Though the company managed to have a profitable second quarter; the sales may have been amplified if the “Vancouver-based retailer” were able to assemble the significant customer demand. However, certain cutbacks such as decreasing the price of yoga mats and proposing new apparel at reduced prices were necessary to draw in customers and enhance sales. Furthermore, many setbacks were conducted to save money. For instance, instead of opening an objective of 35 stores, only seven will open in 2009.

CONNECTIONS
The connection between the article and text is regarding the net inventory. Lululemon is a retail business which buys merchandise and sells to the public for profit. Because of the recession, Lululemon reduced there purchases in anticipation of lower sales and by lowering the amount of purchases it resulted in the reduction of sales. This decision which Lululemon took was necessary in order to maintain the gross profit during the recession. However, if Lululemon had been prepared for the unpredicted demand; the purchases would have increased and resulted in the advance of sales leading to an enlargement in gross profit. Comparing with the text, the connection is primarily concerning the cost of goods sold formula.


REFLECTION
Despite the fact that Lululemon’s inventory wasn’t quite a large amount; the retailer still managed to increase in revenue with the specific cutbacks prepared to ensure customer satisfaction. Although Lululemon was prosperous, it astonished me of how Lululemon earned such a vast profit because even though prices were dropped, the apparel and materials were still expensive. However, the business did make a right decision with the circumstances of the recession by delaying the quantity of products to make certain whether sales would decline or enhance but also it may have been an undesirable choice because of the unexpected customer demand which was shocking. Although, they were unprepared for the customer demand, they had enough flexibility to respond quickly to customer demand. For instance, they somehow managed to handle 800,000 units of merchandise from there suppliers which means that Lululemon has an incredibly good connection with there suppliers or manufactures. Moreover, interesting enough Lululemon actually earned more in the second quarter with the recession than the previous year excluding the recession which proves that Lululemon’s profits did beat expectations compared to other retailers.