Lululemon Plans Much-Needed Diversification of Supply Chain

Lululemon athletica’s new CEO-designate, Christine Day, has the quite the workout ahead of her.

The trendy “yoga-inspired” clothing brand is moving on a fast growth track: the company rocketed from $40.7 million in sales in 2004 to $274.7 million last year, posting same-store sales gains of 41 percent last quarter while opening new stores in Boston, Boulder, and everywhere fit fashionistas hang out in the U.S. and Canada.

But keeping up with that pace could be a problem. The company expects to open 25 to 35 stores this year while at the same time diversifying a supply line that’s frighteningly narrow. Just how narrow? Lululemon’s most recent 10-K filing reveals that the company gets 80 percent of its goods from 10 manufacturers and a single manufacturer accounts for 25 percent of its goods. To top it off, Luon, the company’s “signature performance fabric,” is produced by one Taiwanese company that in turn relies on a single fiber purveyor.

In the meantime, the brand will continue its successful high-fashion marketing strategies: Before stores open in each new market, lululemon does trunk shows at yoga studios, opens a showroom, and hires “ambassadors” among local fitness experts. “That’s how you keep the culture secure while growing and setting up a store for success,” Day told CNBC’s Margaret Brennan. Hopefully Day, a 20-year Starbucks alumna, can use her strong operations experience to make sure lululemon sets up its stores with enough inventory, too.