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LULU

Lululemon Athletica NasdaqGS:LULU Stock Report

Last Price

US$321.69

Market Cap

US$40.5b

7D

1.2%

1Y

-21.3%

Updated

12 Aug, 2022

Data

Company Financials +
LULU fundamental analysis
Snowflake Score
Valuation0/6
Future Growth3/6
Past Performance4/6
Financial Health6/6
Dividends0/6

LULU Stock Overview

lululemon athletica inc., together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women and men.

Lululemon Athletica Inc. Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Lululemon Athletica
Historical stock prices
Current Share PriceUS$321.69
52 Week HighUS$485.83
52 Week LowUS$251.51
Beta1.3
1 Month Change14.49%
3 Month Change4.01%
1 Year Change-21.29%
3 Year Change80.90%
5 Year Change453.40%
Change since IPO2,197.79%

Recent News & Updates

Aug 09

Lululemon Stock: A Wonderful Business At A Fair Price

Why I bought their clothes and why you should buy the stock. In this article, I will outline why Lululemon might just be my favorite retail stock on the market. With robust revenue growth and a track record of success, LULU has provided shareholders with outstanding returns. With management achieving its 5-year goals in just 3, the future looks even brighter. The Best Athletic Apparel Brand on the Market Founded in 1998 by Chip Wilson in Vancouver, Canada, Lululemon (LULU) is a yoga-inspired, technical athletic apparel company for women and men. What started off as a design for women's yoga apparel is now a multi-billion dollar business and one of the top global athletic apparel brands. In this article, I will conduct a deep dive into Lululemon and why I recently bought the business despite its slightly premium valuation. Overview Per its 10-k, Lululemon is a designer, distributor, and retailer of healthy lifestyle athletic apparel and accessories. The company's vision is to be the experiential brand that ignites a community of people through sweat, grow, and connect, which it calls "living the sweatlife." With a focus on curating the most technically advanced and high-quality fabrics for its customers, Lululemon is primarily focused on the yoga, running, and training segments of athletics. In recent years, Lululemon has expanded its product depth by adding accessories and footwear to its merchandise (more on this later). Currently, Lululemon has three primary revenue channels through its customers. Company-Operated Stores Direct to Consumer Other Revenue Breakdown (Annual Report) The other category comprises temporary outlet stores, its MIRROR segment, certain supply and license agreements, and warehouse sales. However, the primary revenue drivers are comprised of retail in-store sales and e-commerce (D2C). As of fiscal year-end 2022, Lululemon operated a total of 574 stores across the globe. As of Q1-23, the company opened 5 net new stores, bringing this total up to 579. The bar chart below shows the stores by country/region. Author Created (Company Filings) The Bull Case Combination of an Established Business & Growth Lululemon's combination of a well-established business and growth is a key reason to own this business. Since its inception, Lululemon has continued to deliver on its promises and has realized massive sales growth over the last 9 years. The chart below exemplifies LULU's ability to consistently grow revenue in double digits for the past 9 years. What's even more impressive is that even during the height of the COVID-19 pandemic, which bankrupted many retailers, Lululemon managed to grow annual revenue by 11% YoY due to Omni channel strength, digital adoption, and a strong brand. Author Created (Company Filings) In times of significantly overvalued tech and SaaS companies, it almost appears that investors have two choices. 1) Sacrifice returns for an established business with high profitability, minimal growth, and a strong moat, or 2) buy companies that are not established, have a weak moat, no profitability, but may encounter hyper-growth and provide investors with market-beating returns. Lululemon provides the best of both worlds with an established business, exceptional profitability, and a significant runway of growth ahead. A key indicator of whether a company will provide shareholders with market-beating returns is the management's ability to follow through on its promises. Simply put, if management is able to achieve its objectives, it is likely shareholders will witness exceptional returns. As depicted by the chart below, Lululemon has provided wonderful returns to shareholders since its IPO, significantly outperforming the broader market (SPY). Data by YCharts In 2018, Lululemon implemented its Power of Three growth strategy focused on three main categories. 1. Product Innovation Lulu's mission in this segment was to expand its product depth through more product selection with a focus on men's products. 2. Omni Channel Experience The omnichannel was focused on Lululemon increasing its online presence to further engage customers digitally. 3. International Market Expansion Relatively straightforward, LULU's main focus was to penetrate international markets and continue to penetrate the athletic apparel market, of which it has a mere 1% market share. Of course, as a premium retailer, Lululemon will never capture all of the TAM (total addressable market). However, it is clear based on its revenue growth and future growth plans, which I'll describe below, that the retailer is still in the early innings of growth and has a significant runway ahead. Power of Three Growth Strategy (Investor Presentation) The future looks even brighter with the business achieving its 5-year goals in three years through doubling its revenue from F'18. On April 2022, Lululemon hosted its investor day meeting and gave shareholders more to look forward to through the introduction of a new five-year growth strategy called the "Power of 3 X 2". In short, Lululemon expects to double revenue over the next five years into F'2026 through the same core pillars: doubling men's, doubling digital, and quadrupling international, which will result in revenue of $12.5B in the next 5 years. As a retailer, Lululemon has plenty of optionality and growth levers it can pull, significantly reducing the risk to shareholders. Rather than being a one-trick pony solely focusing on international expansion, Lululemon continues to drive growth within the Men's segment and is expanding from its core run, train, and yoga merchandise. Despite its focus on growth within the three pillars, Lululemon remains focused on obtaining double-digit growth in its women and within North America. Strong Comparable Sales & Industry-Leading Metrics/Best-In Class Financials & Valuation One of the most important metrics in evaluating the success of a retailer is same-store-sales (SSS), also known as comparable sales. Essentially, SSS is a metric that doesn't factor in sales from new stores and gauges how existing stores have performed on a YoY or QoQ basis. In LULUs most recent Q1 earnings report, the company boasted SSS of 29%. For Q1, total net revenue increased 32% to $1.613 billion, ahead of our guidance, driven by outperformance in North America. Comparable sales increased 29% with a 24% increase in stores and a 33% increase in digital. On a three-year CAGR basis, total revenue increased 27%, an acceleration from Q4. This proves that Lululemon is not solely reliant on opening new stores to supercharge growth. While new store openings are still a key driver of revenue growth for Lululemon as depicted in the YoY store count chart below, the twin engines of new store openings and existing SSS growth will be the core drivers of LULU's growth. Author Created (Company Filings) The retail industry is also known for razor-thin net and gross margins due to the high COGS and operating expenses required. Industry giants such as Costco (COST) and Walmart (WMT) boast 2% and 1% net margins, respectively. Contrary to tech companies that are asset-light, retailers have high inventory costs and are significantly affected by macroeconomic conditions such as inflation and the supply chain. Nevertheless, despite the ongoing challenges of operating a retail business, Lululemon continues to have best-in-class margins and growth relative to its peers. As identified in the company's 10-K, Lululemon identifies its pureplay competitors as NIKE (NKE), adidas (ADDYY), Under Armour (UAA), and Columbia Sportswear (COLM). As depicted by the chart below, Lululemon appears to be overvalued based on its P/E ratio. However, relative to its peers, LULU's best-in-class margins and growth rates justify its higher trading multiple relative to its peers. LULU PE Ratio (Forward) data by YCharts By almost doubling its revenue in three years and continuing its plan to double revenue to $12.5B in 5-years, 32.45x forward earnings is a fair price to pay for a high-growth and well-established business. Brand Loyalty & Product Depth As previously mentioned, SSS is a very positive trend for Lululemon indicative of the strong brand loyalty amongst customers across all channels. As a premium brand priced significantly higher than its peers, brand loyalty, among other factors, and key to Lululemon's success. In its most recent Q1 earnings report, Lululemon posted double-digit growth in all three growth categories listed earlier in this article (see table below): Women's Revenue 3yr CAGR 24% Men's Revenue 3yr CAGR 30% Company Operated Store Revenue 3yr CAGR 13% Digital Revenue 3yr CAGR 51% International Revenue 3yr CAGR 37% North American Revenue 3yr CAGR 26% While Lululemon does not provide investors with concrete customer retention metrics, it is evident based on its long track record of success that there is a high level of brand loyalty amongst Lululemon customers. Cultivating a community of loyal customers and selling the highest quality fabrics have contributed to LULU's success in the athletic apparel industry. In Q1, Lululemon launched its first official footwear product called Blissfeel. Lululemon is using its technical design expertise to further its product depth and immerse itself in footwear, launching the "Blissfeel" shoe in March. Here's what management had to say in the first quarter conference call 2 months ago: We designed our shoe for women first. We introduced our first shoe, Blissfeel in March, and we were proud that it was named the best women's specific shoe in 2022 by Runner's World. The response has been enthusiastic. And since we were prudent with our inventory buys, we have seen out of stocks. Although we expect to be in a better inventory position in the coming weeks, demand has far exceeded our sales forecast. As a result, we do anticipate that we will be chasing into additional inventory for the remainder of the year. While footwear is not yet a major part of the thesis, Lululemon intends to tackle the footwear market with full force. Despite the footwear market being fragmented with major players, Lululemon seems to be up to the task. Management noted that there will be two more styles at the end of the year. We just launched our second style, the Restfeel slide this week, and we remain on track to roll out our next two styles later this year, Chargefeel and Strongfeel. This is just the beginning for us within this category, which has considerable opportunity. Footwear aside, Lululemon has also committed to expanding within existing categories such as Golf, Running, Tennis, Throwbacks, and Hiking. It's safe to say that with an already strong product line and the commitment to expand within its categories, Lululemon is still in the early innings of growth. Financials As mentioned prior, many companies with exceptional growth prospects have not yet achieved profitability. Unlike many, Lululemon has seen robust revenue growth since its inception and turned that into - dare I say it - actual profits.

Jul 18

Lululemon Athletica: Getting In Shape

Lululemon has seen a very strong 2021 and guided for solid continued growth in 2022. While these results are very strong, shares are down over the past two years, for the simple fact that valuations were too high from the get-go. I like the valuation multiple contraction as shares gradually look interesting for a long term position here. In July 2020, I concluded that quality prevails in the case of Lululemon Athletica (LULU) as the company has been doing a lot of things right in recent years, all while the company made an interesting and good acquisition at the time as well. This all sounds great, yet the great operating performance has translated into greater share price performance, with shares trading at 50-60 times normalized earnings at the time, a risky valuation to be either long as the strong operating performance prevented me from getting bearish as well. Back To 2019 When I looked at Lululemon in the summer of 2020, which was a very strange summer, of course, the basis for the thesis were the 2019 results, a year in which revenues rose 21% to $4.0 billion, all driven by comparable sales growth as operating margins came in at a healthy 22% of sales. These results made that sales essentially doubled from the period 2014/2015, as margins have risen, while the company has furthermore reduced the share count as well. Shares of Lululemon traded at $312 at the time, as a net cash balance of over a billion worked down to a $300 per share operating asset valuation. This should be seen in the light of a share count of 130 million shares, revealing that Lululemon was valued at $39 billion, a huge valuation at around 10 times sales and around 60 times earnings. The share price in the low $300s marked all-time highs at the time, as shares of the company traded around $250 ahead of the pandemic, as investors were really upbeat with Lululemon being a great direct-to-consumer play, certainly as consumers might opt for more sports and certainly at home during the pandemic. This was already seen in the first quarter results that year (a quarter which ended early in May). Even as sales fell 17% to $652 million, the direct-to-consumer segment was responsible for the majority of sales as there was a 68% increase in sales at that segment, although moving intercompany sales hurt margins in a big way with retail operations getting decimated. In the meantime, the company acquired home fitness innovator MIRROR in a $500 million deal, with live classes and on-demand workouts being perfect for the ecosystem of Lululemon. The deal was really just a rounding error at the time, although it would deplete most of the net cash balances, as the overall valuation was still too demanding for me to get involved, despite absolute world-class operations. Two Years In The Making Since I last looked at Lululemon in the summer of 2020, shares have seen quite some volatile movements. Shares kept rallying, although with some volatility, and hit a high of $485 per share in the autumn of 2021. With Lululemon falling victim to a reversal in technology and other highly-valued names, shares are now down to $285 per share. This marks a roughly ten percent decline in sales over a two-year time window, marking a dramatic underperformance versus the market as the company has not lived up to the sky-high expectations and its valuation, of course. In March of this year, Lululemon posted its results for the fiscal year 2021. The company has seen continued strong demand as revenues rose 42% to $6.3 billion. These are very strong results as the stores have been on fire, with the direct-to-consumer segment share of revenues falling to 44% of sales as stores reopened across the globe. The company has seen a strong margin performance, with adjusted operating margins being up 270 basis points to 22.0% of sales. These adjusted numbers come in close to the GAAP numbers. The company posted GAAP earnings of $7.49 per share, but commercial traction was evident with the results in the second half of the year being meaningfully stronger than the first half of the year, as adjusted earnings per share came in thirty cents higher. Furthermore, a $1.3 billion net cash position was equal to about $10 per share. More good news was seen for 2022, a year in which revenues are set to rise to a range of pretty much $7.5-$7.6 billion, representing 20-22% annual growth. Earnings are set to rise at a similar pace, with earnings seen at $9.25 per share, plus or minus ten cents. In April, the company outlined some great ambitions for the coming years as it set a goal to double revenues again to $12.5 billion by 2026, a huge target which could be achieved by targeting men and growing the international operations. While such targets are typically nice, there is little evidence to back these ambitions up, as we have seen other retailers outline aggressive plans as well, only to miss on them. But then again, I think Lululemon is a different animal here. Early in June, the company posted the first quarter results which were solid, as first quarter sales were up 32% to $1.6 billion, with growth split between the US and international operations. Growth was split pretty evenly between stores and online operations. Earnings came in at $1.48 per share in a seasonally softer quarter as the company hiked the sales guidance to $7.6-$7.7 billion, with adjusted earnings now seen between $9.35 and $9.50 per share. The company has been buying back some more shares, yet a near $700 million net cash position is still substantial by all means. Final Thoughts The fear of the market is simply a cut to the guidance, even as the company hiked the same guidance just a few weeks ago, with the macro picture deteriorating a bit and as inflation and supply chain issues are still making headlines. Trading at $286, the unleveraged assets trade at $280, as earnings power of around $9.50 per share works down to a 30 times earnings multiple.

Jul 17
Is Now The Time To Look At Buying Lululemon Athletica Inc. (NASDAQ:LULU)?

Is Now The Time To Look At Buying Lululemon Athletica Inc. (NASDAQ:LULU)?

Today we're going to take a look at the well-established Lululemon Athletica Inc. ( NASDAQ:LULU ). The company's stock...

Jul 05

Lululemon to open two new stores and a local e-commerce site in Spain

With significant runway ahead and the company’s "Power of Three ×2” growth plan, which includes a quadrupling of its international revenue from 2021 levels by year-end 2026, Lululemon Athletica (NASDAQ:LULU) enters Spain as the first new market in Europe since 2019. The company is planning to open two new stores and a local e-commerce site in Spain. E-commerce site lululemon.es will be launched in late July and in September, the company will open its first Spanish retail locations in the heart of Madrid and Barcelona’s shopping districts, on Calle Serrano and Paseo de Gracia. “As a brand which supports wellbeing, lululemon has a strong synergy with the active, balanced lifestyle enjoyed in Spain,” said André Maestrini, Executive Vice President, International. “We’re looking forward to connecting with Spanish guests, through our website and at our first retail stores opening in Madrid and Barcelona. The strength of our model across product innovation, guest experience, community and culture provides a unique advantage as we introduce lululemon to our newest market.” The company currently operates almost 40 stores and three local language sites in eight countries in Europe: France, Germany, Ireland, the Netherlands, Norway, Sweden, Switzerland, and the UK. In addition, lululemon ships to additional countries across Europe via its EU website. Athletic apparel stock gets a Buy rating from the Wall Street Analysts and Hold rating from SA quant rating system.

Jun 28

Lululemon Athletica: My Favorite Athletic Apparel Stock

LULU is my favourite athletic apparel company. LULU is gaining international exposure using its unique community-based retail model. The Power of Three Strategy has been accomplished ahead of schedule. LULU has a potential upside of 72% from the current price in a 6-12 month horizon.

Jun 20
We Like Lululemon Athletica's (NASDAQ:LULU) Returns And Here's How They're Trending

We Like Lululemon Athletica's (NASDAQ:LULU) Returns And Here's How They're Trending

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a...

Shareholder Returns

LULUUS LuxuryUS Market
7D1.2%0.9%1.3%
1Y-21.3%-32.0%-11.7%

Return vs Industry: LULU exceeded the US Luxury industry which returned -32% over the past year.

Return vs Market: LULU underperformed the US Market which returned -11.7% over the past year.

Price Volatility

Is LULU's price volatile compared to industry and market?
LULU volatility
LULU Average Weekly Movement7.3%
Luxury Industry Average Movement7.3%
Market Average Movement7.8%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.2%

Stable Share Price: LULU is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 7% a week.

Volatility Over Time: LULU's weekly volatility (7%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
199829,000Calvin McDonaldhttps://www.lululemon.com

lululemon athletica inc., together with its subsidiaries, designs, distributes, and retails athletic apparel and accessories for women and men. It operates in two segments, Company-Operated Stores and Direct to Consumer. The company offers pants, shorts, tops, and jackets for healthy lifestyle and athletic activities, such as yoga, running, and training, as well as other sweaty pursuits.

Lululemon Athletica Inc. Fundamentals Summary

How do Lululemon Athletica's earnings and revenue compare to its market cap?
LULU fundamental statistics
Market CapUS$40.46b
Earnings (TTM)US$1.02b
Revenue (TTM)US$6.64b

40.2x

P/E Ratio

6.2x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
LULU income statement (TTM)
RevenueUS$6.64b
Cost of RevenueUS$2.86b
Gross ProfitUS$3.78b
Other ExpensesUS$2.76b
EarningsUS$1.02b

Last Reported Earnings

May 01, 2022

Next Earnings Date

n/a

Earnings per share (EPS)7.99
Gross Margin56.88%
Net Profit Margin15.36%
Debt/Equity Ratio0%

How did LULU perform over the long term?

See historical performance and comparison