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Book Reviews

The Leisure Economy
By Linda Nazareth, John Wiley, 249 pages, $32.99

The holiday period is a good time to think about the future. If you're away from work, relaxed, on vacation and at leisure, than you may be experiencing what is soon to become a major societal trend.

Linda Nazareth, an economist and broadcaster with Business News Network, believes we are about to leave a time-crunch era, in which obligations overwhelm us, and enter an economy driven by leisure.

"The leisure economy is already in progress, and over the next couple of decades it will only gain steam. If you want to be ahead of the curve, you have to understand why it is happening and what the possible fallout from it will be. Concentrate too much on the time-crunch economy and you may be missing the biggest economic shift to hit North America in decades," Ms. Nazareth writes in The Leisure Economy.

It will happen in large measure because of the baby boom generation. As they retire, the amount of leisure time in their life will increase and so will the aggregate amount of leisure in our economy. Of course, their incomes will also drop, and some will be financially hard-pressed in retirement, but they will still seek new pleasures with their extra time. As well, the generations that followed the boomers, X and Y, have been less immersed in work - indeed, at times, derided as slackers - and they will continue to demand a balance between work and leisure.

That's the simplified explanation. And this is not a simplified book. It brings to mind the plaintive call by Lyndon Johnson for a one-handed economist, because the former U.S. president was fed up with their advice constantly being larded with "on the one hand this" and "on the other hand the opposite."

Ms. Nazareth takes us diligently through the contradictions and complications of leisure - from defining it to figuring out how different demographic groups will act in the future. For example, Generations X and Y may want leisure, but what happens when they have kids? And, if they work less and have less income, that might mean diminished expenditure on leisure.

But unless the baby boomers decide never to retire, her basic thesis is likely to be correct. And the ramifications are considerable. "You need to understand the leisure economy if you run a business. If you have been serving a market that wants instant everything and speed over quality, then you need to start thinking about what consumers who are not time-starved want," she writes.

The book falters somewhat in providing that assistance, because she leave it to the end, and the possibilities are immense. The ultimate winners will emerge from an amalgam of the leisure proclivities of the boomers and the imagination of entrepreneurs. While leisure hours will swell, there will be competition from those hours from various providers, and some of the leisure hours may not be directed to consumer spending, but rather to volunteer work.

In entertainment, retired boomers will be a huge potential audience for someone. Libraries might bloom, and eating out might be replaced by cooking at home, with the time available to create elaborate meals - not to mention enrolling in advanced-cooking classes. Some boomers will seek additional education. Crafts and hobbies might soar - but which ones?

We won't know for a while. But, clearly, leisure is likely to grow and play a larger economic role. Her book is an evenhanded look at a little noticed but likely trend that we should all be alert to.

In Anatomy of a Trend, sociologist Henrik Vejlgaard uses examples from fashion, electronics, athletics and entertainment to show how trends get fuelled.

Individual psychology is a key component, as people react with enthusiasm or skepticism to new styles and offerings. At one end, are people such as Madonna and soccer star David Beckham, who always seem to be exhibiting the latest style; at the other end, are the Amish, who reject everything new in favour of the old.

It starts with trend creators, such as fashion designers, who develop the styles. Trendsetters, such as the Madonnas and Beckhams, are alert to new things and leap into those that they like. From there, it moves to trend followers, who are also very open to new things, but want to see others using it first. Next comes the mainstream, in two waves: early mainstreamers, who accept the new styles just before the majority, and mainstreamers, who buy in when everyone else seems to be using it.

By now, the trendsetters are on to new fashions, but the former trend has yet to run its course. Late mainstreamers, who are dismissive of new offerings, buy in a few seasons later; finally, conservatives, who prefer styles that have existed for years if not decades and are skeptical of new offerings, might come on board.

Certain cities - such as London, Milan, and Los Angeles - play a critical role in spreading the message, as does the media. But, interestingly, Mr. Vejlgaard sees the media slowing down the adoption of new trends in the future, because we are more segmented in our media choices and are sharing trends less.

It's an interesting book, more complicated (and far less engaging) than The Tipping Point in addressing the phenomenon of trends. But as you scan the year ahead, it may help to understand the forces that will affect your industry.

<>Just In: When Professionals Have to Lead (Harvard Business School Press, 232 pages, $37.95) by Harvard professors Thomas Delong and John Gabarro and consultant Robert Lees helps leaders in professional services firms set direction, create an inclusive culture, and gain top performance.

Mastering Online Marketing (Entrepreneur Press, 260 pages, $23.95) by marketing consultant Mitch Meyerson, with fellow consultant Mary Eule Scarborough, presents 12 strategies to make money on the Internet.

Sales trainer Ron Marks offers a guide to finding, leading and coaching salespeople in Managing for Sales Results (John Wiley, 203 pages, $29.99).   - 2007 December 26    GLOBE & MAIL

The other upcoming retailers in this field is Title Nine and Nau. - Jason

Why Gaiam is stretching its lifestyle options
Yoga mats and Tae Bo videos are company staples, but retailer also wants you to buy its solar panels

Yoga made a big splash in the market this summer when Vancouver-based Lululemon Athletica Inc.'s initial public offering soared past expectations.

But Lululemon isn't the only yoga-related company with an impressive stock price. Gaiam Inc. - a lifestyle company known best for its wellness and fitness products - is generating a lot of buzz too. In fact, Gaiam, with its diversified expansion plans online, may hold advantages for investors over Lululemon.

"Gaiam is the first mover in the whole spiritual, cultural space online," said Howard Lindzon, who founded the investment video website wallstrip.com, writes an investment blog and manages a hedge fund with a small position in Gaiam. "Lululemon is more of a retailer, which I tend to avoid."

Gaiam, based in Broomfield, Colo., was founded in 1988 by Jirka Rysavy, a Czech immigrant who had no prior business experience before he made his fortune by founding office supplies retailer Corporate Express.

Billing itself as "a branded lifestyle media company," Gaiam spreads its business all over the "wellness" map, selling items as varied as organic cotton apparel, Tae Bo DVDs and solar panels.

Its branded products are sold in Canada, the U.S., Britain, Australia and Asia in stores as well as through catalogues, online retail, television and subscription clubs.

Gaiam's shares held up during the market meltdown of August and hit a five-year high of $21.20 (U.S.) on Aug. 27. The shares have stayed in that range since, closing Friday at $19.68 on the Nasdaq.

In fact, wellness and organic food stocks held up well during last month's market turmoil, noted Desjardins Securities in a recent report that listed 15 stocks in the group. With its share price increasing by 28.7 per cent over the month, Gaiam led that group.

Gaiam's revenue in the past fiscal year rose 54 per cent to $219.5-million, while profit per share was 3 cents, down from 8 cents per share in fiscal 2005.

Mark Argento, an analyst with Craig-Hallum Capital Group, said it is the company's increasing expansion from lifestyle goods to online content that has investors excited.

Gaiam recently spent a total of $10-million to buy social networking site Zaadz Inc., multimedia lifestyle company Lime Media and Conscious Enlightenment, which provides reward-based credit cards.

Lime was majority owned by Revolution LLC, the healthy living investment vehicle owned by America Online Inc. founder Steve Case. Gaiam plans to unify these brands and launch an online lifestyle community at Gaia.com this fall.

Mr. Argento said this kind of investment distinguishes Gaiam from Lululemon.

"It's more than just kind of the latest athletic trend," said Mr. Argento, who is advising clients to buy the stock with a price target of $23. He is one of three analysts who follow the stock.

While it is not yet clear how much the company expects Gaia.com to contribute to revenues, Mr. Argento said the online community will help Gaiam expand beyond its retail segment, which brought in $22-million of $52.4-million in second-quarter revenues.

Revenue from the company's direct-to-consumer segment, such as its catalogues and subscription clubs, increased 12.6 per cent year-over-year to $30.4-million in the second quarter.

Mr. Argento also said focusing on more media-related products could also boost margins, which are already on the rise. For the second quarter, Gaiam's gross margin increased to 64.2 per cent, up from 62.3 per cent in the second quarter of 2006 and 48.6 per cent from the second quarter of 2005.

The online community initiative is geared toward the so-called LOHAS market segment (lifestyles of health and sustainability), which the Natural Marketing Institute says includes 50 million Americans.

The institute says these consumers are more likely to be female, over 45 and have a higher level of education. According to its latest research, the marketplace in the United States is now worth about $209-billion.

"More than anything I think the success of Lululemon demonstrates the size of the market and the attractiveness of the demographic that they [both] play into," Mr. Argento said. "I think they've done a good job of building [their] brand over the years and that creates an opportunity for them to expand into other areas and capitalize on ... the relationship they have with their customers."

Mr. Argento estimates revenues will grow 14 per cent to $250.3-million for fiscal 2007 and hit $282.9-million by 2008. He sees profit per share growing 43 per cent to 33 cents this year and 53 per cent to 50 cents next year.

This kind of growth doesn't come cheap. Gaiam is trading at 65 times estimated earnings for the next 12 months. It's worth noting that that is cheaper than Lululemon, which is trading at an estimated 127.14 times.    - 2007 September 10  GLOBE & MAIL

Lululemon 

NO ORDINARY COMPANY
Buying into the Lululemon life
Hate capitalism? You'll love the clothes ... and the soaring stock

Yesterday, I bought a Lululemon T-shirt. It's no ordinary T-shirt. It's made with seaweed, which releases marine amino acids, minerals and vitamins into the skin upon contact with my sweat. The fabric provides anti-inflammatory, anti-bacterial, stress reducing, hydrating and detoxifying features. Also it has spandex, to hold my bulges in.

Although it cost me twice as much as any other T-shirt, I am sure you can see why. You can also see the logo, which looks vaguely like a Greek letter, but is really a stylized "A." People can tell right away that I'm a Lululemon type of girl, the kind who rides around on a bicycle with a yoga mat strapped to her back.

Actually, I hate yoga (except for the relaxation part, where you get to lie on your back with your eyes closed). It makes me feel clumsy and dumb. But I wear yoga clothes whenever I can get away with it. They're comfy and forgiving, and now, thanks to Lululemon, hot. People who'd never be caught dead in sweat pants or track suits because they're so tacky and suburban are snapping up Lululemon's yoga pants. You can go almost anywhere in them - even yoga class. Best of all, they make your butt look decent.

The target market for Lululemon's clothes is the same market that gobbled up Naomi Klein's best-seller, No Logo. They are super-aware undergraduates and yummy mummies who care about the environment and values (not to mention how their butts look). They hate to shop at chain stores and are suspicious of big corporations and profits. Lululemon has their number. "No pesticides, herbicides or other harmful chemicals are used to grow organic cotton," says the tag on its organic cotton T-shirts. In case organic cotton isn't pure enough for you, some T-shirts also come in soy.

Lululemon's clothes are selling so fast the stores can't keep them in stock. And the stock is even hotter than the clothes. When the company went public in July, the share price soared 50 per cent on the first day of trading. Founder Chip Wilson, who opened the first store in funky Kitsilano and styles himself a sort of laid-back Beach Boys surfer dude, is now a centimillionaire.

Like Anita Roddick, the late, lamented genius behind The Body Shop, Chip Wilson understands how to tap into the most significant retailing trend of our time - green consumer capitalism. The way you do it is to never, ever mention money. You are not selling merchandise. You are creating values. Your vision (according to Mr. Wilson) is to elevate the world from mediocrity to greatness, and your customers (a word you never use) are partners in that vision. They feel that when they buy from you, they're becoming better people too.

"If we can produce products to keep people active and stress-free, we believe the world will become a much better place," says Lululemon's mission statement. The bouncy, wholesome young women who work in its stores are not sales clerks - they're called "educators." And their business isn't selling workout clothes. It's creating components for people to live longer, healthier, more fun lives.

Lululemon's educators are encouraged to embrace Mr. Wilson's philosophy of life, which is to eschew the ordinary and strive to become the best that you can be. In a world of postmaterial values, the goal is not to make money and get filthy rich. The goal is to become personally empowered. Lululemon's aggressive expansion plans - it wants to open 25 new stores next year - are merely the means to help as many people as possible achieve this goal. As the official corporate history says, "Although the initial goal was to only have one store, it was soon obvious that to provide a fulfilling life of growth, family, salary and mortgage for our amazing staff, we would have to provide more opportunities. It was really a matter of grow or die because active minds need a challenge."

Lululemon's postcorporate ethos is in perfect sync with the times. Nobody under 30 wants to work for (or buy from) big companies any more. They want to be documentary filmmakers, organic chefs or Web designers - independent agents with interesting, new-age jobs that give them lots of freedom to express their talents. Some will even succeed. They never want to have a job where they have to dress up in a suit and tie (or suit and pantyhose) and worry about how to maximize the EBITDA.

My grandfather spent half his life working his way up to a desk job where he could trade his work-shirt for a coat and tie. Not too long ago, women with ambition (among whom I was one) dressed up in highly structured power suits. But today, the real status marker is dressing down. Not only is dressing down more comfortable and liberating. It also makes a statement that you're not some cog in some giant corporate machine. People who are able to dress super-casually while they work are people who, in some important sense, have it made. (Personally, I'll have it made if I never have to wear pantyhose again.) It's ironic in a way that the very people who embrace Ms. Klein's version of rapacious, soulless, environmentally destructive capitalism - with its Third World sweatshops and brainwashing campaigns to create slavish brand worship of useless consumer products - are so eager to embrace other brands with which they happen to identify. But that's capitalism for you. It has a way of giving people what they want. Ms. Klein's anti-capitalist vision of a purer, more values-driven world has been co-opted by capitalism itself.

"Do one thing a day that scares you," counsels the Lululemon manifesto, a document that features prominently in all its stores. "Friends are more important than money. Drink as much fresh water as you can."

Who among us would not buy into that? Especially if you can make your butt look good too.  - by Margaret Wente    GLOBE & MAIL   2007 September 15

Lululemon stretched by demand

Lululemon Athletica Inc., the Canadian yoga apparel retail phenomenon that went public in July, has run into what it calls a "class A problem": Supply can't keep up with demand, and its stores keep running out of products.

What is more, the 59-stores-and-growing chain doesn't yet have the systems to keep track of just how much business it is losing by not stocking stores adequately.

"We're dealing with a class A problem - more sales than forecast," Robert Meers, chief executive officer at Vancouver-based Lululemon, told the company's first conference call with analysts late yesterday.

The difficulties flowed from a 30-per-cent jump in same-store sales in the retailer's second quarter. Those are sales at outlets open a year or more, and considered an important bellwether in retailing.

Of that gain, 5 per cent was the result of the stronger Canadian dollar.

Mr. Meers referred to inventory snags at newer stores in New York and Chicago. But the troubles are even more widespread, John Currie, the company's chief financial officer, said in an interview later. "That's been a high-class problem that we've had in numerous locations. ... [New] systems will help," Mr. Currie said. "But, quite frankly, a lot of it is, 'Just how high is high?' We're certainly realizing that there is more upside potential."

By early in the new year, the company will have new technology in place that should help track just how many sales are being lost by not having enough inventory in the stores, he said. And the company is planning on heavy sales for the rest of the year: it has prepared to quickly airlift more merchandise from Asia.

Lululemon has been on a tear over the past few years as it established its brand in Canada, where the bulk of its business is done, and is now gearing up for a major international expansion.

Its stock has surpassed just about all predictions, soaring more than 50 per cent on its first day of trading in July and moving even higher in the following days.

Still, underlying the hype and excitement is the reality of a business getting bogged down in basic everyday functions. "You have to consider execution risk regardless of how much you think of the company and how well it's performed to date," said Mark Rosen, an analyst at Accountability Research Corp.

Lululemon's inventory problems have even touched well-established stores in Canada, Mr. Currie said.

In Chicago, Lululemon was out of running outfits just when a big marathon was being held, an analyst said yesterday. And in New York, the chain always runs out of the women's sizes 4, 6 and 8.

Along with the inventory difficulties, Lululemon also had to delay three store openings in the second quarter because of trouble getting permits.

The company said it is on track to open 25 new stores in North America this year, including the eight new stores opened in the first two quarters. And it expects to open 30 to 35 new outlets next year.

It also expects same-store sales this year to be in the mid- to high-teen range, and diluted profit per share to be between 30 and 33 cents.

LULULEMON (LLL)
Close: $38.77, up $1.12
Lululemon Athletica Inc.

 - by Marina Strauss   GLOBE & MAIL    2007 September 11

• IPO shares jump 50% - REUTERS

Lululemon has down wonderful things for the female behind and is now doing wonderful things for investors pocket books. Let's hope that they use some of this money to invest in butt shaping and body enhancing clothes for men and women alike...and all this as the Dow Jones continues to shake up investors.

Lululemon Athletica Inc. shares soared about 53 per cent in debut trading in New York and Toronto, suggesting robust investor demand for the trendy yoga-wear retailer.

The shares jumped to $27.61 (U.S.) in Nasdaq trading after the stock was priced at $18 a share, with almost 10 million shares changing hands. The $327.6-million it raised through its initial public offering was much higher than anticipated.

The Vancouver-based chain of 59 stores had planned to raise about $200-million in the offering, with new investors having a 26-per-cent stake. The company had mulled reducing the size of its IPO but this week decided to keep the offering at 18.2 million shares.   Source: reportonbusiness.com

It's a real lulu - but not for everybody

When Lululemon Athletica Inc. went public in July, it was one of the hottest Canadian initial public offerings in recent memory.

But don't expect many Canadian fund managers to own the high-flying stock of the trendy Vancouver-based yoga-wear retailer.

Most of the shares are in the hands of investors south of the border since Lululemon hired U.S.-based Goldman Sachs Inc. and Merrill Lynch & Co. as lead underwriters, and many of the shares went to their clients, investment sources say.

Some Canadian managers simply couldn't get their hands on the stock. Others balked at the underwriters' move to jack up the IPO price to $18 (U.S.) from an initially proposed range of between $10 and $12, or took a pass when they figured they wouldn't be able to get a sizable amount.

And those who got a piece of the action sold their Lululemon shares shortly afterward because they couldn't get enough to make a difference in their portfolios.

"We were holders, but we subsequently sold our position," said Jennifer Dowty, a portfolio manager at Toronto-based MFC Global Investment Management.

"It was a very small percentage of our portfolio, and wasn't adding a lot of value," said Ms. Dowty, who helps run the Manulife Growth Opportunities Fund.

She wasn't interested in buying more stock to build up that position - less than 1 per cent - because the shares got pricey in a hurry.

Lululemon stock, which soared more than 50 per cent on its first day of trading, yesterday closed at $35.83, down 21 cents on the Nasdaq Stock Market. It ended at $37.03 (Canadian), down 22 cents on the Toronto Stock Exchange.

"It's trading at just under 70 times next year's earnings," Ms. Dowty said. "It's not a cheap stock."

Peter Hodson, a portfolio manager with Sprott Asset Management Inc., describes Lululemon shares as now being "priced for perfection."

Mr. Hodson, who runs the Sprott Growth Fund, said he "killed" his order for Lululemon shares on the eve of the IPO when the underwriters considered bumping up the price to $20 (U.S.).

"We were interested in buying a high-growth company that had a strong brand name," he said. "We might have gone to $17, but we clearly weren't going to $20."

If Lululemon, with 59 stores and growing, succeeds in its U.S. expansion, the stock will probably go higher regardless of valuation because many U.S. momentum investors will pay up for future growth, Mr. Hodson said. Momentum investors, willing to ride hot stocks with strong profit growth, are more common in the United States than in Canada.

Toronto-based AGF Management Ltd., for example, holds Lululemon stock, but it is in the AGF Aggressive Growth Fund run by Chicago-based Driehaus Capital Management LLC, a momentum investor.

Hedge fund manager Allan Brown at Burlington Capital Management Ltd. said he was interested in buying Lululemon stock, but wasn't able to get shares through the IPO. The stock has since become too expensive, he said. "To me, it's somewhat overvalued."

Lululemon stock is coveted because a good growth story comes along only every couple of years in the retail sector, Mr. Brown said. It is also not like a technology stock, where there is innovation or technological risk. "It's a simple story, and people are willing to pay a very high multiple for those types of growth stories because they are very rare."

The big question now is whether Lululemon, which is a small company, can manage that growth, he added. On Monday, Lululemon said same-store sales growth jumped 30 per cent in the second quarter. But it also said it was having trouble keeping up with demand, and stores were running out of products.

"They are really having a hard time managing that growth because they don't have the systems and infrastructure in place now," Mr. Brown said. "That is the risk, but if they can do it, there is a lot of growth to come."   - GLOBE & MAIL    2007 September 13  by Shirley Won

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