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Lululemon Athletica Inc. Message Board

  • SNCK SNCK Feb 25, 2011 10:38 AM Flag

    Who understands Market Cap?

    LULU has a market cap of 5.5 Billion! Do you understand what value the market is placing on this stock. A retailer with revenues of 600-700 Million.

    ARO has a market cap of 1/2 LULU at 2.25-.28 Billion with revenues of 2.36 Billion.

    ANF has a market cap of 4.95 Billion with revenues of 3.47 Billion.

    URBN which is another Hot retailer has a market cap of 6.13 Billion but at least has revenues of well over 2 Billion.

    AEO has a market cap of only 2.98 Billion with sales of over 3 Billion.

    Even the powerful UA only has a market cap of 3.4 Billion with Revs of 1.06 Billion.

    These are not small numbers I am throwing out. Even the difference in size between UA and LULU is over a Billion Dollars. Everyone I talk to knows the UA name, hardly anyone knows the LULU name. Yes thats because they are small and still growing, but the market is already awarding them a market cap as if they have achieved 1.5-2 Billion in revenue if you comp them to these other companies.

    Now I will give LULU mad props for the operating margins it has at the momment. If those keep up it will certianly give them a premium when it comes to price/sales. When you can sell a T-Shirt for $55 dollars your going to make good money. Its the benefit of being a boutique and catering to a certain selective clientele. But to ever have the mass market appeal that alot of the companies I mentioned have with revenues 3-5 times as high as LULU you are going to have to sacrifice those great profit margins for broader appeal. If you don't offer lower priced products you sacrifice growth. Either way in my opinion it will be hard for LULU to achieve both the growth the market is pricing in along with the high margins the market is addicted to.

    Would love anyones thoughts. As long as they are constructive toward the conversation on a true and fair valuation of LULU that is :)

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    • Yes, I think you are right. It is LULU huge operating margins that set them apart. And High ROE. They generate 2-4x the Sales per foot as those other retailers.

      I don't think LULU is ever going to be MASS. They are premium priced product. But there is still plenty of room to grow.


      I agree a lot the growth is priced in - but that doesn't mean that the stock has to come crashing down. The Company can grow into its earnings.

      With over 45 Stores in Canada (at 1/10th the population of the US). The US store count can continue to grow (from only 75) for many more years to come. The Sales and Earnings will come.

      A more interesting comp is Luxury Retailer LVMH -- that trades at 9x Sales too.
      Thanks.

    • nordstrom is a good example of a company going after the higher end customer and has a pe of 16, 10 billion in revs and a mkt of 9.6 billion. That's the reality of what will happen in the future as the more it expands the bigger mrkt they must appeal to. The problem is look at other companies such as NILE with a monstrous shrt shr and huge PE. It also has inst ownership over 140% which is why the price of this stock is totally controled by them. i'm makin a fortune daytrading this both ways and had up to 6000 shares shorted last 2 weeks and was facing a monsterous loss kept on shrtin it 500 shrs at a time up to 84 from 73 If you don't have the capitol DON'T be playin this stock. Margin calls could eat u up alive!

    • exactly! that's why they have so many shorts. Not to say the company might not have a good product and segment focus, but are they really worth that multiple? Is the world going to be overrun with $100 yoga wear?

 
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