1. At Lululemon, how can sales be up while gross margin is down?
Original blog posting (January 28, 2016)

2. Lululemon Athletica Inc.
Lululemon is an athletic apparel company
Founded in 1988 and headquartered in Canada
Helped popularize yoga pants in the U.S.
During 2015, Lululemon’s sales increased while its gross margin declined
Photographer:

4. Question 1
How is gross margin (also known as gross profit) calculated?

5. Question 2
If sales increase, what would you ordinarily expect to happen to gross margin?

6. Question 3
Examine the statements of operations for Lululemon as given in the article. Is the Wall Street Journal headline referring to dollars or percentages?

7. Question 4
What do you know about expenses at Lululemon during 2015 based on the Wall Street Journal headline?

8. Question 5
What possible reasons might there be for this situation to have occurred at Lululemon?

9. Question Recap
How is gross margin (also known as gross profit) calculated?
If sales increase, what would you ordinarily expect to happen to gross margin?
Examine the statements of operations for Lululemon as given in the article. Is the Wall Street Journal headline referring to dollars or percentages?
What do you know about expenses at Lululemon during 2015 based on the Wall Street Journal headline?
What possible reasons might there be for this situation to have occurred at Lululemon?

10. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at Questions or comments? Contact Dr. Wendy Tietz at