Monday, January 30, 2012

Does my butt look fat in this?

Kid Dynamite summed up the case for lululemon athletica inc (always spelled in fashionable lower case) very simply. His sister, and presumably many other women, thought the clothes make their butt look good. I gather this is not original - Howard Lindzon has also turned a few choice phrases in bullish promotion of the stock.

I thought this was crass - but for the life of me I can't think of any better explanation for the stock price.

Background

lululemon athletica it is a remarkable company. The website describes the product (in lower case) as "yoga clothes and running gear for sweaty workouts" and it sells its products in the three fattest nations in the world (USA, Australia and Canada). You would think a specialist yoga and running clothes retailer in those markets would be playing to a limited audience.

But if you thought that you would be wrong.

lulu had sales of $629 million for the nine months ended October 30. This was up about 35 percent from last year. This is a retailer so the fourth quarter matters. Last year they did 245 million in sales in that quarter and this year (at a guess) it will be 35 percent higher - say 331 million. Annual sales will be somewhat shy of a billion dollars.

A billion dollars in sales is a lot of "yoga clothes and running gear for sweaty workouts". Nike by contrast does just over 20 billion in sales but shoes are a much bigger category - and their market is seemingly much wider. After all Nike also makes shoes for yoga and running (and my guess is the shoes should command more gross dollars of margin than the leotards).

Scale and stock price

A billion dollars in sales is huge for such a narrow category. But even that is small compared to lulu's stock price. You see lulu market cap is now almost $10 billion. The stock is priced at 10 times sales. That is amazing for a fashion company. Nike by comparison has a market cap of $46 billion and a price to sales ratio of just over 2. And Nike is not a thin margin business. No other clothing company comes close.

Here is a chart of Apple's price to sales ratio:


Apple spent most the time at about 1 to 3 times sales (currently just over 3) and never exceeded 7 times sales.

Apple was never as richly valued as lulu lemon athletica.

So I want to play the valuation guessing game.

*  What is the value of the end market for yoga and running clothes. Is it $5 billion per year at which point lulu will be priced like Nike or is it larger or smaller?
*  Can you explain the stock price in any terms other than a play on female vanity? Is Kid Dynamite's explanation of the brand appeal and the stock right?
*  Even as a play on female vanity is it overpriced?
*  What if anything keeps the competition out of yoga clothes?

I would really like to know what any of the big institutional holders are thinking. Maybe their butt looks fantastic but their brain looks a little suspect.

I have no position. Shorting female vanity is not something I have ever done successfully - and I sure as hell would not want to be long this. Besides the entire "it is overpriced" argument applied 50 percent down from here.




John

58 comments:

Anonymous said...

I am trying to check their gross margins to compare to Nike.

After spending some time in California last fall, lulu was a stock that I wanted to check out. A featured speaker at Grant's Investor Conference Fall 2011 is an investor, he says he likes vertically integrated retailers, but that's a guy who definitely got in at vc pricing.

Their clothes are great but pricey. I think Nike when it starts concentrating can deliver as good clothing and underprice them.

The shop that I saw was in an up-scale San Jose location.

I think I will buy the clothes and skip the stock.

Anonymous said...

Just remember - lulu is not in the market for just Yoga and running where. It makes general exercise ware for men and women.

Richard said...

John,

I showed your post to the compliance lawyer who shares the marital bed. She owns several lulu items that she wears to yoga. Her feedback:
1. Their line is very flattering (I checked and she is right!)
2. They have tapped into the inner city, professional, high net worth female market, who will spend any amount if it is flattering;
3. No obvious competition.
Nike has the dual head wind of the "sweat shop" taint and Tiger Woods association, and is not a viable competitor at our house.

The are too many "imponderables" around this stock. Move on.

Michael M said...

"What is the value of the end market for yoga and running clothes."

I have no opinion on the stock, though shorting it would fit nicely with my own peak pretentiousness thesis, but just want to suggest that maybe your category definition is too narrow. Are you telling me that women don't wear this stuff at home, to bed, to campus, when picking up the kids etc (we are talking about American women to whom sports wear is a second skin and comfort is a constitutional right, right?). And could they also perhaps extend the "yoga is cool and noncommercial"-brand into new categories?

Anonymous said...

http://www.youtube.com/watch?v=vax4xLYWxpQ

Not sure how it helps the stock, but they are into sponsoring cycling as well

the Senator said...

John:

I'm a regular reader in Houston, Texas. Its a hot, humid place to live. This is important.

Lululemon's stuff is best described as "casual athletic wear." Its the kind of stuff you wear on a 105-degree July day with 80% relative humidity...and look like you're not sweating. A colleague's wife turned our law office on to the brand after describing that their shirts contain some sort of anti-bacterial silver-threading that prevents them from smelling bad. Whatever the secret, it works. And their shirts are stylish. Its the best sartorial invention to hit Houston since linen pants.

I'm guessing they're targeting the upper-income, age 25-40 demographic. I wouldn't quite lump Lululemon into the "female yoga pants" category--they're slightly sideways and more upscale than that, as they seem to pushing the traditional boundaries of athletic wear with their styles, fabrics and pricing. The $100 USD-yoga-pants market strikes me as similar to the $20 USD ham sandwich market.

I have no idea whether Lululemon a good investment, but I would suggest that you try their clothing if you live in warm climate.

John Hempton said...

Michael - I did say that I was not short it. This company clearly has something valuable - 35 percent growth is amazing.

But there are very few clothing brands in the world that have ever had a market cap this large. The GAP did once - but that did not work out very well.

Nike still does.

Any other takers?

Its an amzingly pricey stock. Amazingly.

John

Nick said...

Fad stock, classic short hunting ground and in typical style shorts are getting severely burned by momentum.
LULU has managed a few Qs of "beat and raise" so I would steer clear of the short side for now.

I can confirm the fit commentary - asses look great in these things, just ask Raj Raj.

Valuation is clearly mental - some more context on market cap:
LULU $9.2bn
The Gap $9.2bn
Abercrombie $4.1bn
Urban Outfitters $3.9bn

To buy this stock you have to believe that either - it is the next Gap, but with better margins.
Or that the stock is going up therefore you should buy it.

Until the latter ISN'T true, don't short.
I would be happy to miss the first 20% of a slide to make a further 50% down and avoid it blowing up another 50% from here.

Anonymous said...

I had a friend who worked as a store manager and her feedback after one week was that it was an amazing place to work; the branding had really worked over her in about 10 days.

I think they really do have a 'story'... the interesting thing will be whether they can expand sales as they "really" go global. I don't think they are open to counterfeiting in the same way that Nike is... the people who buy their product at the moment really appreciate it.

Until the brand become's devalued I think this will continue to grow... probably about 3 years left before that happens... there is no competition.

If they expand into Singapore / Hong Kong and Europe ... potentially could justify the share price.

will said...

My wife tells me there is a store in bondi junction mall - you should see it for yourself.

Other feedback is that it is good quality but overpriced for what it is (much like the stock price I imagine)

John Hempton said...

I have been spying that shop in Bondi Junction. It used to be at the bottom of our elevator (opposite the gym). Logical spot.

Moved into a more expensive part of the mall...

Anonymous said...

Lorna Jane?

Kid Dynamite said...

Hi John - thanks for the link. Howard Lindzon's description of LULU was "The Facebook of Ladies' Behinds".... that's pretty apt.

look - I remember back when I lived in NYC, and I'd go to the gym, and every single girl in the gym would have the same brand of pants - those ones with the little Omega on the back - yes, LULU's pants. I only wish I'd checked to see if they were a public company back then...

take a look at their other line of products - for teen dancers/gymnasts - its growth potential is scary too.

side note: I wish I could make this up - my word verification CAPTCHA for this comments was "butoles"

Sami said...

obviously you do not go to any gym :) it is not yoga but it is your every day cloths. it is a clothing company and a retailer. every single female in the gyms I go to wear their brand and now even the men .

Tim said...

As a guy, I will be very sad when this yoga pants fad comes to a close. As an investor, I'll pass on LULU.

I don't see Nike emerging as a competitor, because even if their quality was as good, the brand is too commercial. LULU has the boutique, high-end yoga niche that Nike is just too big for.

One potential competitor is Lucy Activewear, owned by VFC. They've got ~70 stores, so not as big, but I know quite a few women that love their clothes and swear by them. Lucy has more than just yoga gear and is probably a touch less expensive than LULU, but not too much less to be perceived as "cheap." My wife is a yoga instructor and she likes both - she buys Lucy b/c yoga instructors get a discount there. My personal opinion is that their clothes are equally flattering.

Huss said...

My wife is not a runner, or a big exercise person, but loves yoga. It appeals to her (and tons of 20-40 year old women, I suspect) because it gives the mental satisfaction of a workout, without the jarring impact/effort of running or lifting weights. So the specific end market use is gaining ground very nicely - 6am yoga classes in upscale Philly suburbs, each day of the week, are full of housewives and professionals. Add in that the clothing is flattering and women like to wear it around the house, out while shopping, running errands etc and its no longer is a niche product with one use. I went into the store, prior to Christmas, openly admitted to the sales woman that I had no idea what I was doing and she started upselling me on all the products, made it very easy and not intimidating. I thought the wife would like the yoga pants, and get occasional use out of it, once or twice a week at class, now she is wearing it ALL the time.

Colin P said...

Do they have a large holiday inventory surplus? They had a huge warehouse sale in Chicago this past weekend. http://www.lululemon.com/rosemont/warehousesalechicago

I understand that things were heavily discounted, big lines, big waits. It felt like every woman I know (large and small), was either going or talking about going. I am just puzzled as to why they would do this?

Huss said...

I should also note, per competition from Nike, it is not that big a threat to crack LULU's stronghold on this market.

Put it this way - a fashionable woman, will always associate Nike with sports, machismo, brute, etc. The name and swoosh will trigger those characteristics. LULU, however, is new, it doesn't have those stereotypes hanging over it and because it has started as a female brand, it embodies femininity much better [hard to believe I'm typing this in an investment blog post but it's true]. My wife would never buy Nike, let alone go in a Nike store. But lulu hits a different trigger in her mind. Not all women will think that way obviously, but the brand is going to trigger femininity much faster than Nike ever will.

Anonymous said...

LULU is a very unusual company. Their sales productivity is astounding: over $1,800 sales per square foot, and over $1,000 gross profits per square foot. Try and find another apparel retailer anywhere in this universe, now or historically.

harry said...

I've never heard of them myself but I'm not really in the market for female yoga-ware.
Having said that they have a large amount of cash on the balance sheet with little debt. They are certainly well positioned to penetrate new markets and my DCF model only puts them as trading around 18% above implied value.
A potential short? Maybe, but a very risky one.

Anonymous said...

I'm not sure to what extent it's the same in Australia, but in the U.S., particularly at colleges and in wealthy urban circles, the traditional requirement that one wear actual pants in public has slipped away. It was a little startling at first, but skin-tight leggings are now acceptable everywhere except formal offices. So the lulelemon sales are probably at least as much casual wear as athletic wear, and that is a much bigger market, given modern American lifestyles.

RJ said...

This really is an incredible fashion story. I don't think there's anything that gets in front of it in the near-term if they can continue to enter new markets and dominate like they have in the US and Canada.

You've got a lot of customers who would rather buy 2 Lululemon pieces of clothing than 10 Under Armour or Nike.

Adam said...

I agree that the stock looks way overvalued, I would not buy any at these prices, and I would question the judgment of any who does buy it.

That being said, if a good investment has 1) good operations, 2) good capital management, and 3) is undervalued by the market, then I'm looking to invert that for a short candidate. While LULU is certainly overvalued by the market, I don't see any reason to think that they have problems operating or capital managing capital. So I'm planning to sit this one out.

Anonymous said...

"...it sells its products in the three fattest nations in the world (USA, Australia and Canada). You would think a specialist yoga and running clothes retailer in those markets would be playing to a limited audience."

Really? I would expect the fattest and wealthiest nations to spend the most on gym memberships and active/exercise clothes. If you are poor and skinny, you probably aren't worrying about toning your glutes.

Aharon said...

I have spoken to a few women who buy their clothing. The typical comment was by a friend of mine, a lawyer who fits the demo (late 30s, lives in downtown DC, fairly high salary), who said, "There is no way to justify an $80 t-shirt but I just bought three."

The high price, rather than an impediment, is an incentive: buyers can afford it, and enjoy a mild frisson of guilty pleasure that is amplified by the fact that other women (and, it seems, a fair number of men) know they're wearing $80 shirts, $150 pants, etc. The idea that Nike or someone else could come in with a cheaper knockoff misses the point--it's half about the look (and here lululemon's focus on quality has paid off), and half about the signifiers.

This is, of course, all intangible, and intangibles are hard to base investment theses on.

I've been dreaming of shorting LULU for some time, and have tried to figure out whether there's another way to go about this. My very crude and obvious initial thoughts boil down to:

-Consumers buy the clothes because they like the clothes and the brand

-Investors (/speculators, if one wants to make a distinction with a variable degree of difference) buy the stock because the company has been excellent at execution

What could cause either of these to change?

In the first case, I think LULU has inoculated itself well against the sweatshop label so far. Will they continue to do so?
Similarly, will they continue to have a relatively pacific workforce, or will there be some labor disgruntlement? This is a non-trivial consideration, I'd argue, because any hint of labor unrest (in a rapidly growing labor force) could poison the space LULU occupies in buyers' minds.
In line with the above, I have heard from several people about LULU's "cultishness" and the vague Ayn Rand vibe that permeates its culture (apologies to all hedgies who believe Rand is the second or first coming). This hasn't become much of a meme yet, but will it?
The strange murder that took place in a Maryland LULU last year seemed like it could be a catalyst for reassessment of the brand, but hasn't been so far.

On the second point, execution, LULU has been very good at handling growth and adding product lines so far. But is the move into menswear progressing according to plan?

I reckon this doesn't add much to the discussion, but I'm thinking on it.

revelo said...

Unlike the demographic that buys Nike, precisely because of the ostentatious logos, upscale urban professional women in the 30's to 40's are not particularly keen on being a walking billboard. And I don't see any prominent logos on the clothes on their website. So how do they differentiate their $100 black yoga pants from the $50 gap imitation? $20 ham sandwiches indeed. Women aren't immune to the ongoing recession. And I doubt those those silver anti-bacterial threads someone else mentioned are patented, because my backpacking liner socks had something similar 15 years ago. Indeed, I can't think of any barriers to competition whatsoever.

The problem is timing. I don't think the mania is yet at its peak. Lots of hungry momentum sharks would love to squeeze out a pound of short-selling flesh if this thing really goes into blowoff mode. "The market can stay irrational longer than the rational investor can stay solvent." I'd shelve this one until you're a little more certain it can't go any higher.

Belcher said...

I've been long LULU for a while (years) solely on the Kid Dynamite thesis, but agree, it is crazy priced now, but at the same time, I am not prepared to turn around on my position any time soon.

There's other signs that the short case may be getting stronger. The store murder . The bizarre hidden bag quotes.
The bizarre not-so-hidden bag quotes.

Although, this recent announcement may be a response to the recent weirdness.

And lastly, when I was searching for the articles above, I came across this!

Skid said...

Female vanity is hard to comprehend. There is this thing called "vanity sizing" in which large clothes are given size labels for small clothes, because fat women prefer it ("I'm only a size '4,' yay") and doing so will increase sales.

Belcher said...

Also, I view this like I viewed CROX prior to its epic collapse. They are similar in some ways, but obviously very different in others. I also view LULU a little bit like TLB. In fact, its a bit of a mix between the two.

LULU has enjoyed explosive growth in their stock price do to a "revolutionary" product with a "keeping up with the jones'" type hype.

I do not think LULU will crater like CROX, however. CROX blew up because at the heart it was sort of a gimmick, with a lot of a hype and lack of product mix (and actually ended up saturating the market). LULU is much less hype than CROX, and offers a pretty wide selection of products within its narrow niche, and is obviously expanding.

I think LULU will instead see a long, slow decline like the 'luxury' brand TLB. It will be around for a very long time, but will eventually fade from the spotlight as new name brands and fads take over and as more competitors fill in and saturate.

ChrisD said...

Can you tell me what product you used to create the price / sales chart for Apple?

"Cassandra" said...

John

Take a deep breath, pull your locate on the stock, take your hand off of the mouse and repeat after me:

I won't short hi-grow top-decile momo on valuation
I won't short hi-grow top-decile momo on valuation
I won't short hi-grow top-decile momo on valuation
I won't short hi-grow top-decile momo on valuation
I won't short hi-grow top-decile momo on valuation

...fraud, material non-public information, dumpster-diving, expert networks, paying higher commissions to be the call before the first-call, sleeping with the CFOs wife, interviews with Yogi's, whatever gives you the edge, but if one allows oneself to be enticed by a vaulting stock price of serious growth, one will often be consumed with little to show for it except a foul demeanor and lighter wallet, and you will become Ahab and these #*&@!! things your white whale. Find yourself something boring from the middle of the cross-section or, if I cannot save you the heartache, then at least wait for LULUs first torpedo...

Anonymous said...

Perhaps not 'female vanity' so much as 'intense cultural pressure on females to conform to an impossible body standard.' But I digress.

Lorenzo said...

I live in Vancouver where Lululemon was founded. It is more than just wear for yoga and running, girls here wear Lululemon just about everywhere, it is very flattering to the female body and their clothes are pretty damn comfy. I've taken a visit to UBC, the main university in Vancouver and I would say that 6 out of 10 girls are wearing some sort of Lululemon dressing on a daily basis.

There is also a very strong culture built around the company. I do agree that it is overvalued but I also believe that it would be foolhardy to short it.

Anonymous said...

Gap Inc. owned Athleta is a competitor at a much better stock price.
http://www.gapinc.com/content/gapinc/html/aboutus/ourbrands/Athleta.html

Rahul Deodhar said...

Two thumbs up to comment by Richard.

Converse of "Hell hath no fury like a woman scorned" is applicable. If women really, really love it, then it is a long!

At 10X it is tempting though.

Anonymous said...

The post reminded me that my last Asian girlfriend had a special pair of leggings with extra padding in them to make her butt look bigger when she wore jeans.
I suspect that the Asian butt enhancement underwear market operates on a different dynamic to that in the US, Canada and Australia.
GMCR? A good product that grows and grows until it reaches a saturation point.

Anonymous said...

Those intangibles are just not about female vanity - someone has already mentioned 'the cult of Lulu'. An insightful article illustrating how Lulu manages to turn mere customers into Lulu devotees -
http://www.theglobeandmail.com/report-on-business/rob-magazine/ceo-of-the-year-christine-day-of-lululemon/article2247700/

Jeff Robinson said...

Lulu like all Canadian success stories that try to expand globally will crater. It's a Canadian thing.( I'm Canadian and spent 20+ years trading/sales at major wire houses.)

The competition over the last year has come up with some great products that I know people are switching to for 2 reasons: price and quality.Just ask your wife or her friends.

The stock still has the "cult" followers and shareholders behind it, similar to what RIM had. Cult holders never sell. They continuously evangelize the investment story to others. Once this trend reverses - look out below. (Think RIM,again)

Lulu is a great company and a great success story. Like all fad/cult stocks they do/will face their day of reckoning. (Think Green Mountain Coffee)Last year I picked RIM as my stock to implode. This year I have chosen Apple but Lulu was a very close second.( more on my Apple pick here: http://contrariansmind.wordpress.com/2012/01/19/has-apple-reached-the-tipping-point/

Anonymous said...

Anyone want to comment on the huge warehouse sale in Chicago last weekend?

Robert H. Heath said...

For sure, LULU's expensive. For sure, it'll be a great short someday. But without a clue what the catalyst is for the revaluation, you short at your own risk.

Other posters have pointed out that LULU is, in many cities and certainly here in San Francisco, everyday wear for many women. So the potential market may greatly exceed the relatively small number of yoga practitioners.

And it's not just because the clothes are flattering to a woman's figure. I've recently started attending yoga classes, and it took me a few months to figure out that "drishti" is not Sanskrit for "that apricot-colored, scooped neck, racer-back tank top on the far side of the room"

Gareth said...

John, you said “it sells its products in the three fattest nations in the world (USA, Australia and Canada). You would think a specialist yoga and running clothes retailer in those markets would be playing to a limited audience.” Although potentially tongue in cheek, it’s probably a relationship worth thinking about (perhaps another time). I’d guess there is a strong positive correlation between per capita spending on such recreational sports gear and BMI or body fat percentages, although one also influenced by obvious wage differences. Countries that are thin aren’t generally thin because they run around the block or go to Bikram hot yoga. Countries that are fat have a lot of people trying to do something about it, although mostly unsuccessfully. It’s a point of study for those trying to play the obesity trend, or those considering whether to continue their new year’s resolution into February (best weight loss advice I ever received was "you can’t exercise your way out of a bad diet").

John Haskell said...

With this kind of backing, 20x revenues would be cheap

http://dealbreaker.com/2010/11/tim-geithner-bought-shares-of-sweet-ass-manufacturer-to-teach-his-kids-about-stocks/

Look for LULU to catch a couple bill of TARP if next quarter comes in light

David said...

The market cap is actually $9bn and they have $0.4bn cash, so $8.6bn EV = 8.6x historic sales, 6.6x sales for this year. Still pretty high though...
Clearly the company was much smaller then, but I bet lots of people thought it was expensive just after IPO in mid 2007, when it traded at $17 = 16x historic sales, 9x the current year. And the stock has almost quadrupled since then!

re other large clothes retail brands, how about H&M ($55bn mkt cap) and Inditex/Zara ($55bn mkt cap) - both trade at about 3x sales currently. Obviously both much broader in their range rather than just fitness wear

too risky to short I think unless there are specific signs that the wheels are coming off...

Colin P said...

It appears, they've had warehouse sales for a long time, it's nothing new. Actually, it's probably a brilliant strategy.

WellRed said...

I am from Vancouver (the home of Lululemon), where they have been around for 10-15 years.

I first started seeing these pants in high school, when out of no where, tenagers who had never been to a yoga class started wearing them daily. My male classmates and I applauded the effort, as they are effectively push-up bras for the ass.

In university, all the way across the country, it was a similar situation. Young women (I imagine aging women as well) put these on when they don't want to put in any effort (because, I am told they are comfortable). My suspicion is that they are a whole lot more flattering than baggy sweatpants (plus they are much more presentable if you have to be in public).

Oh and did I mention that most girls I know don't work out in anything else?

Granted I grew up surrounded by people who were upper-middle to upper class, so maybe this doesn't extend down the income curve, but I suspect a lot of people who can't afford it find some room for them on their credit cards.

Pricing is unbelievably rich, but there are a lot of growth opportunities and they could fill out that P/S over the course of a few years and cost a short a lot of basis in the process.

As an aside, the founder of the company was my neighbour and he's a racist prick...

Anonymous said...

I agree with many of the comments mentioned here in that LuLu clothing has it's appeal in the upscale market, is worn just as much as casual wear, and thanks to very successful marketing and branding, is desired just because it's LuLu. One thing that really hasn't been mentioned is that the quality of the clothing is not there. When I complained about this to a friend of mine she didn't believe it until she went to buy a new pair of pants to replace her older pair. She was amazed at the decline in the quality over the years. It does not wear as well as other brands such as Nike and Adidas. Sooner or later this is going to catch up to Lululemon.

Anonymous said...

John,

Few words about competition. I did a good amount of work in clothing industry:)

"Technically" speaking, barriers to entry are relatively low - you've got to invest in shops and designs, but it's not much compared to many other industries. However, consumer adoption is normally a bitch. E.g. the majority of new brands fail to find their place on the market and simply die out.

Dare I say, in no small part because their producs tends to suck. You'd be surprised how challenging it is to actually make clothes people would like to buy, especially if you're not in "$5 pants in discount bin of Wall-Mart" segment.

As many people wrote, lululemon managed that - not only their product is desirable, it's even seen as "advantageous" (the whole butt thing, huh). It probably not worth 10x sales, but it does have worth.

Regards,
Dmitry.

P.S. And I don't think Nike can really compete. People who buy this wouldn't buy ... counter-prestigious brand such as Nike.

Anonymous said...

I don't know if you have any thoughts about Under Armour, but to me, the two brands seem similar. Clothes that have moved from a particular niche to everyday clothes (people all over my office building wear UA to work these days). And the brand quality has such high perception, that people are willing to shell out full retail to buy for themselves or to give the gear as gifts.

We all love Gero said...

I got short at $45 and then again at $59. So you can tell I feel just great right about now!
I know that one day those prices will look clever. It doesn't mean I won't blow up in the meantime. This is a classic Keynes marketing remaining irrational moment.

I compared them to Limited Brands (owner of victoria secrect). They are a $14bn mkt cap (and $9bn sales). To do that volume they have 2,500 stores. LULU do their $1bn sales with 180 stores and a average website. The one thought that keeps me wondering is that they could grow to $5bn sales with more stores and some traction in Europe.
Other readers comments regarding wearing 'sports' attire at any time of day is another worry.
I live in London at the moment, when I come home each Christmas I am amazed at home much lycra I see.
Euro stylers would never been seen popping into the newsagent looking like that.
If it was easy it would be no fun.

Anonymous said...

Off topic but it would appear things have come full circle for this blog...

http://www.bloomberg.com/news/2012-01-31/former-rbs-chief-executive-fred-goodwin-is-stripped-of-knighthood-by-u-k-.html

Anonymous said...

agree with @aharon re. "cultishness" . there is definitely a "Landmark Forum" vibe based on talking to employees.
But I guess most women who buy these dont know or care.

Scott said...

John, I was chatting with a friend about lululemon athletica. He lives in Lake Forest, IL. First) He is 60 years old, his residence is named, not numbered. Second) he works out at the pool every other day. Third) He works out when many women are present. When I mentioned Lululemon, he commented before I went any further. "Wonderful clothes, they make women's butts look better." At his club, he says all the women wear lululemon outfits. He anticipates them expanding into Nike's territory. Just an observation, but I have noticed women will spend until the end of time if it makes them feel prettier.

Jono M said...

Anyone else noticed the recently retired founder is dumping stock?

http://investor.lululemon.com/sec.cfm

Anonymous said...

I have been wearing LULU mens workout gear for 6 years and love it over any other brand. I will be clear and state that i have never done yoga. i also wear to gear for causal wear for all seasons( winter/fall/summer). the gear is good.

Lulu has had great growth and I never complain when earnings/profits continue to improve and move higher and more important when the stores cannot keep product on the shelf from demand. I have owned this from the IPO and very pleased but the big question is where do they go from here and can they continue the success.

I am still buying the mens stuff for me and ladies for my wife.

Anonymous said...

Crocs (CROX) is always fixated in my mind as classic hype. I live in CO and had a bunch of friends who had way to much cash for their own good and all they could figure out to invest in was the company down the street like CROX and CBEY. The slide was impressive.

True, every person and hospital worker in America needed a pair, but the confidence to not patent and hold technology and expect that Walmart and Target couldn't sell a close enough product proved to be a bit pretentious.

I would just compare to see if there are any similarities.

Anonymous said...

Just a couple of anecdotal points supporting a short thesis:

- LULU is a Canadian company and this was the first chrismas where they are start doing sales that mark down prices (and also was doing warehouse sales) in Ottawa. I take this as a sign that their margins will eventually come under pressure.

- There is another Quebec company ( joshua perets) that is making similiar cloth targets the teens/early-twenties which kids around here love. So the barrier to entry is eroding.

tirath said...

Hey John, have kept this post in my bookmarks because what you say makes perfect sense. A good company selling good merchandise does not mean an extravagant price is acceptable. When you wrote this article Lulu was USD 9.2 Bn; it is now at 10.7 Bn odd. Waiting for gravity to work :)

John Hempton said...

I did say I was not short. Surely there is a price at which it makes sense (maybe a couple of billion dollars ago) but I don't much do this sort of short.

This is a fantastic company with a fantastic (both senses of the word) valuation.

I do scummy companies with fantastic valuations mostly.

J

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