Accounting, Finance, Legal and Environmental Issues

This section highlights internal, external, and regulatory forces that might impact a decision on whether or not to invest in lululemon. Primary Shareholders Founder and former CEO, Chip Wilson, currently owns 34. 4 percent. 12 The directors and executive officers (12 persons) own 35. 2. 13 Diversified shares eliminate the chance of one major unit holder potentially controlling lululemon's financial and operating activities. The two largest external shareholders are Fidelity Investments and Capital World Investors, Inc, which own 14. 9 and 9. 9 percent respectively.

14 These rivalry investment firms have over a trillion dollars in assets and represent multiple clients all over the globe. 1516 However, they do not hold large enough pieces of Lululemon to exercise control. When an investor owns 20 percent of a company's shares they often begin to show signs of significant influence. 17 As a potential investor there is minimal risk in regards to lululemon's shareholder control. Restated Statements & Policy Changes In assessing lululemon's annual reports from 2007 to 2010, the financial statements are comparable and consistent.

New revenues and expenses due to change in business practices have been clearly stated. The reported numbers create minimal risk to an investor in determining a buy option. Discontinued Operations During the first quarter of 2008, lululemon ended three joint ventures with Descente Ltd. These results lead to the closure of four corporate stores located in Japan. 18 The loss from the discounted operation was $1. 2 million. 19 Lululemon made a point to recognize this and made sure to fully accrue it in quarter two. As an investor this type of action is extremely positive and could be critical in the decision to invest.

Legal Issues Intellectual Property Lululemon does not own patents or exclusive intellectual property rights to their fabrics or manufacturing technology. Their suppliers and manufacturers own the intellectual property rights for lululemons' fabrics, technologies, and manufacturing processes. Which are based in numerous regions including China, Canada and South East Asia. Lululemon does however own the trademarks of lululemon athletica & design, their logo design, and lululemon as a word mark, in Canada, the United States, and all other countries in which their products are sold or manufactured.

Lululemon's word mark and design are registered in over 66 jurisdictions, covering 114 countries in addition to their registrations in Canada and the United States. Lululemon owns the trademarks on many of the names of fabrics including Luon, LULLURE, Silverescent, and Vitasea. 20 Other Legal Issues Lululemon has faced four class action lawsuits since 2007. On March 14, 2007, one of lululemon's executive officers, James Jones, filled suit against the company claiming that they terminated his employment contract without cause and lawful compensation resulting in breach of contract and wrongful dismissal.

21 May 8, 2008, an employee named Brian Bacon filed a similar suit. Bacon claimed that lululemon terminated his employment contract without cause and without reasonable notice resulting in breach of contract, losses and damages. Lululemon found both claims to be without merit and strongly defended against them. 22 On March 26, 2009, an employee named Brett Kohlenberg filed a class action lawsuit alleging that lululemon violated numerous sections of the California Labor Code by failing to pay their employees for certain rest and meal breaks and failure to provide itemized wage statements.

April 2, 2009, three employees filed a class action lawsuit alleging that lululemon violated numerous sections of the California Labor Code by requiring employees to wear lululemon clothing during working hours without any compensation for the cost of this clothing and by giving bonuses in the form of gift cards, only redeemable at lululemon. In both cases, lululemon agreed to general terms of settlement.