Lululemon Athletica (LULU) is a yoga apparel manufacturer, marketer and retailer in the Apparel-Retail industry. As fitness becomes all the more necessary and attractive to new customers due to work-from-home scenarios, workout apparel would pose a promising future for its industry. Therefore, Lululemon is a great BUY.
LULU plans on opening 40-50 new company-operated stores across the globe in 2021, which points towards better sales. Lululemon launched a new campaign where customers can resell their near-mint condition clothes to Lululemon for a gift card worth $5-$25 depending upon the clothing item resold. The second-hand clothes would be cleaned using a state-of-the-art cleaning tech and sold at a discount. Lululemon's stock price reached $334, which is over-valued as compared to its intrinsic value but still provides strong financials and a promising future.
Lululemon majorly specializes in women's apparel and has plans on moving forward with more focus on men's apparel. LULU's 'Sweatlife' platform offers fitness tips and workout routines to its members. The response from its website was well received and liked by the masses.
LULU has beaten the expectations in its last earnings report with gross revenue up by 11%. Despite COVID, the company has shown strong financials with an increase in sales on a YoY basis. In fact, 52% of its revenue consists of online revenue. LULU has beat market expectations in every sphere, as it has an EPS of $2.58 as against market expectations of $2.49. It has shown a CAGR of 20% over the past year.
Lululemon also managed to stay afloat during COVID without affecting its sales, because of its excellent liquidity.
One of the few risks the company faces are the stock being overvalued if the company's upcoming earnings report underperforms its expectations the market sentiment might move in the opposite direction. In the end, it all boils down to the fact, how much is the investor to pay for the stock if the investor wishes to diversify in the athletic apparel market LULU should be their choice, whereas if investors base their decisions on the hype of a home based workout, Nike or Peleton would be better choices.