Lululemon to Acquire Franchisee in Mexico, Sources Say

Consumer Staples Author: EqualOcean News, Jiahui Liao Editor: jiaqi Li May 17, 2024 01:10 PM (GMT+8)

Lululemon Set to Enter the Mexican Market.

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Recently, Lululemon (LULU:NASDAQ) has agreed to acquire its franchise partner's operations and retail locations in Mexico.

The local franchisee, Lululemon Mexico, operates 15 stores in the country and has been in business since the athletic apparel brand entered the market in 2017. The company confirmed in an email that all employees will be transferred to Lululemon.

"For Lululemon, Mexico remains an exciting market," said Celeste Burgoyne, President of the Americas and Global Guest Innovation at Lululemon, in a statement. "We believe we are well-positioned to continue expanding in the region."

The company's CEO, Calvin McDonald, stated during a conference call with analysts in March that all of the company's international markets are "strongly trending" this quarter. After the COVID-19 pandemic, while many North American clothing retailers have seen declines, the company has maintained double-digit sales growth.

Chinese consumers' fondness is a strong driver of Lululemon's performance growth. In the fourth quarter of the fiscal year 2023, Lululemon's net revenue in Mainland China grew by 78% year-on-year, and the full fiscal year net revenue grew by 67%. This growth rate stands out in Lululemon's global market. In comparison, during the same period, Lululemon's net revenue in the Americas and other global markets grew by 9% and 36% year-on-year, respectively; for the full fiscal year, the growth rates for these two regions were 12% and 44%.

As early as 2022, Lululemon, known as a "middle-class standard," began to expand its physical stores in Mainland China from first-tier to third-tier markets; with the rise of cost-effective consumption, Lululemon, which once strictly controlled discounts, also appeared in the outlet channel. By the end of the fiscal year 2023, Lululemon had 127 stores in Mainland China. Compared to 99 stores at the end of the fiscal year 2022, the brand opened 28 new stores in Mainland China in the previous fiscal year, including 13 new stores opened in the fourth quarter. In the fiscal year 2023, half of Lululemon's new global stores were opened in Mainland China.

However, the current channel expansion dividend of Lululemon is slowing down, so entering the Latin American market may be an important part of the company's global store expansion strategy.

As of press time, Lululemon's US stock is priced at USD 338.28 per share, with a total market value of USD 42.594 billion.