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Lululemon Athletica Gets a Boost From Private Equity

Last week, lululemon athletica ( LULU ) founder, former CEO, and former board member Chip Wilson agreed to sell half of his stake in the little yoga brand that made it big. In doing so, Wilson freed the company from having to fight some difficult battles over board members and the company's direction, both of which Wilson had been vocally critical of in recent months.

Wilson's role is going to be diminished, as he has agreed to sell half of his 27.7% stake in the company to Advent International, a private equity firm with around $32 billion in assets under management. For investors in Lululemon, the question now is: What does Advent's increased role mean for the future of the business?

Fat Face is Advent's best comparison for Lululemon.

Advent sank money into the brand's distribution, expanding its international footprint, growing the online business, and launching a wholesale division. While Lululemon has shown online strength -- online sales grew 25% last quarter -- there is a definite lack of international exposure and the company's wholesale business is minuscule. Wholesale, warehouse, showroom, and outlet sales combined to account for just 7.9% of revenue last quarter.

Good news for Lululemon

Hopefully, Advent's positions on Lululemon's board and its influence in operations will help the company expand as it strengthens its core business. Of particular interest will be how Advent can help Lululemon get its international expansion up and running in a meaningful way. The retailer has taken baby steps to international expansion, and sales outside of North America only accounted for 6% of total sales.

Advent is a good fit for Lululemon; it has a history with the business; it can help buffer the future impact of Chip Wilson; and it can help Lululemon expand internationally, which is one of the business's largest opportunities.

Investors are clearly happy about Wilson being put on the back burner, but the added benefits of Advent's involvement make Lululemon look even more attractive. Look for more expansion talk over the coming fiscal year, and don't be surprised if wholesale revenue starts to make up a larger slice of this business.

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The article Lululemon Athletica Gets a Boost From Private Equity originally appeared on Fool.com.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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