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In last month's Report on Business magazine Brenda Bouw wrote Lululemon Atheletica and about how in just 10 years, the Vancouver-based company went from a single store in British Columbia to one of the hottest IPOs of 2007. Jim Cramer, host of CNBC's Mad Money, said that Lululemon wasn't just a retailer it was a "mass cult." And he wasn't the only one that raved about the company.

Celebrities such as Madonna, Brooke Shields, Paris Hilton and Sting are part of the following.

So a recent brouhaha over seaweed in clothing sold by the company raised questions about whether Lululemon could continue its phenomenal growth.

But despite a brief pummelling of the stock after the retailer removed health claims from its VitaSea line of seaweed-infused shirts, the controversy hasn't seemed to hurt it. In fact, Lululemon says it is enjoying strong sales of its products and for the three months ended Oct. 31, Lululemon earned $7.6-million, or 11 cents a share, on revenue of $66.2-million.

Professor Ken Wong from the Queen's School of Business was here to talk about Lululemon and it's Teflon-like ability to survive PR woes.

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Ken Wong is a faculty member and the Commerce '77 Teaching Fellow in Marketing at Queen's School of Business, where he has held both teaching and administrative positions.

Beyond Queen's, Wong has also taught in degree programs at Cornell, Carleton University, Radcliffe College and Harvard's Continuing Education Program and in executive programs at York University, University of Toronto, Dalhousie University and the University of Alberta.

He received his B.Comm and MBA degrees from Queen's University prior to a period of doctoral studies at the Harvard Business School.

Judith Pereira, globeandmail.com: Thank you Ken for joining us today and taking our readers' questions. Let's start off with a reader from Kingston Ontario.

Alan-James Mehlomakulu from Kingston: Are there one or two things in particular you feel led to Lululemon's ability to weather the negative press? I had expected any stock with such a high P/E ratio to be hammered as a result of such negative news, but this was not the case.

Ken Wong: Thanks so much for having me here Judith. To answer the question, I think most people would think the same. However, there are three things one has to remember:
(1) The company did a voluntary retagging immediately—they didn't try to brush it under the carpet.
(2) There is actually some issue as to whether the charge against Lululemon was justified [see http://www.treehugger.com/files/2007/11/new_york_times_15.php] and
(3) revenues were up 84%, comparable store sales up 26% (constant dollars), gross profit was up 210 basis points and diluted earnings per share were $0.23 on net income of $16.2 million, compared to diluted earnings per share of $0.10 on net income of $6.8 million the first nine months of fiscal 2006.

So I guess the question is "do markets react, beyond immediate shock, to speculation and allegation or facts and performance. Over the long haul, in an era of information, you'd hope the latter (performance).

Judith Pereira: And now we have two questions that touch on some of the same theme.

D.B. from Toronto asks: How will Lululemon have to change its pricing structure as it moves into the suburbs? I don't know if I can see people spending $100 on a pair of pants just to go to the gym.
And A. Madison from Toronto wonders: Is Lululemon becoming too trendy for its own good?

Ken Wong: Both of these questions touch on what I think is the biggest challenge for Lululemon or any other brand that becomes an overnight sensation. On one hand, a good part of their intial success grows from a focus on a particular class of customer and solving a particular consumption problem—note that I don't use the word "need"for a specific reason—in a very effective way. Then comes the risk of losing that focus as they grow...think about Tim Horton's...should they sell lattes?

Each move to a new arena of customer raises questions about whether the new target is consistent with whatever made the brand great in the first place. So...will a suburban customer pay $100 for a pair of pants? Maybe...because it could be that before that suburban customer was going out of their way to get to a Lululemon store and is already paying $100 a pair. Then again, if the suburban locations are populated with less affluent, less trrend-conscious consumers the answer is no. This is why retailers have to be very careful picking where they locate...the goal is to add convenience for the custoimer that wants what they have. Anyone who thinks...build it and they will come, is fgooling themselves

Is Lululemon too trendy for their own good? Again, it depends on whom you ask. For the traditional Lululemon customer the answer for most is probably no because this retailer actually does a lot of things to put their resources - money, people and attention - behind their image. That said, there will be some who say "yes"...simply because, for them, the initial appeal was that Lululemon was NOT mainstream.

Jasmine Sterry from Vancouver writes: How does a brand prolong its lifespan? Some hot brands seem to go the Bennetton or Tommy Hilfiger direction. From exclusive, to everywhere, to nowhere. Others seem to continue to stay hot? Nike, Tag Heuer, etc. What's the secret here?

Ken Wong:The question one has to ask themselves is "what does our brand represent?" If part of the answer is "exclusivity" then there is a great risk of going mainstream and becoming "common." Long-standing brands that do have "exclusivity" as part of their cachet will resist that kind of growth and tend to rely, instead, on offering a small number of customers a wider array of goods.

Brands like Nike don't really rely on exclusivity, they have other characteristics. As long as they preserve that characteristic, growth is not a threat to the brand. Examples...Fisher Price can sell anything tied to kids: would you buy an FP MP3 player?. Nike may be great for athletics...would you buy a Nike car?

But what makes a brand really great is when every touchpoint with the brand absolutely "reeks" of the characteristics the brand wants associated with it. So, if you are FP and kid-appropriate is the characteristic, everything has to look and feel like it is based on the child. If you are Lululemon, the people in the store the look and smell of the store, the language you use...everything...has to be about "athletica."

CP from Toronto writes: It seems that competitors—Aritzia, Roots—are trying to latch on to the Lululemon bandwagon and it seems that yoga wear is going mainstream. What will Lululemon have to do to stay the premier yoga brand?

Ken Wong: Imitation may be the most sincere form of flattery...but it absolutely hammers your margins. So in a sense, this is another variation on how one avoids becoming a victim of their own success.

There are couple of things: First—never forget the franchise customer that got you where you are today. Customer acquisition is a lot more expensive than customer acquisition and so you want to make sure you stay in touch with the evolving needs of the yoga enthusiast. Second, is to play on your specialization and not fall victim to going after a mass, price-conscious buyer who simply wants to jump on the bandwagon...you'll never be able to retain that customer with a differentiated product and, if you don't differentiate, you have to compete on price. Competing on price is a slippery slope for a business like LL because any movement to price means you need to get a lot more cost conscious and that can make it hard for you to do the "discretionary" things that make you great. You don't want to be the next Eaton's...and you don't want to see your profits suffer the way Loblaw's and other grocers have when they tried go compete on price versus Walmart. Don't forget too...part of the buzz around LL is the stock price and we all know what will happen there if margins fall off.

Luc M from Montreal writes: Will Lululemon need to have a different marketing strategy to expand in the States?

Ken Wong: I am not an expert on the U.S. yoga market but my guess is that the "strategy" has some legs. What may have to happen is some change in "tactics" given the size and competitiveness of the American market. Canadian retailers have not, as a rule, done well in the U.S. but that doesn't mean they can't. I guess my advice would be to "keep the strategy" but hire someone who knows how to work in the U.S. environment. Second, do your research and be selective as to which markets to pursue. While you have to be prepared to adjust, the goal is to find markets where you don't have to change too much.

CT from Toronto asks: What should companies do to weather bad publicity? Are there any companies that you can think of that made a really bad move?

Ken Wong: There are so many different kinds of bad publicity that it is hard to come up with one set of recommendations. But at the most fundamental level, I always remember the Willie Nelson quote "if you are doing something you don't want other's to know about, then stop doing it." Translation—cease and desist whatever is generating the bad PR. Find the source of the action and correct it (assuming it is justified). Apologize if necessary but ALWAYS tell the truth. Second, don't forget that PR is about perception and not, necessarily, reality. Even if the allegation is not justified, legitimize the validity of the concern and then, ideally, do something that shows your commitment to that belief. In other words, do something that will enable you to say, in effect, "and here's what we do or have done to make sure nothing like that would ever happen here" (or happen again).

Judith Pereira, globeandmail.com: Unfortunately, we've now run out of time but I'd like to thank Professor Ken Wong from Queen's who answered our readers' questions.

Ken Wong: It's been a pleasure. I hope everyone has a happy and healthy holiday season...and to the folks at Lululemon...just keep "walking the talk" and you'll do very well!