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Lululemon Athletica Inc. Message Board

  • techstrategy techstrategy Sep 9, 2011 11:03 AM Flag

    Sold my $60 Sept puts for $6.60. Going longer term on the puts...


    First, LULU had a pretty good quarter, in line with what I expected. Longer term, we are going to see this drop much further, but be careful of near term squeezes:

    1) Most important statement on the conference call: Canadian comps grew at "low single digits". US comps grew at ~30%. The longs will celebrate that statement, but they miss the bigger point. US Stores are maturing. Their SS growth (comps) will soon approach the growth rate of Canadian stores. The impact of store growth is DECLINING as a % of total. 35 stores on a larger base is a smaller percent each year. As the use stores mature, the SS comps will decline to about 10%. That means growth rate declines, which means multiple declines. WE ARE AT THE TOP.

    2)As I've said many times, LULU got a currency lift which has now reversed. LULU's guidance is based on CAD/USD parity. If we move into recession, that is overly optimistic. Even so, he said that currency was a little over a penny this quarter. If at parity for a year, that's about $.05. If it reverts to $.95 or 2009 levels of $.90, you can double or triple that impact. Plus, he is looking at the direct margin affect, not the discretionary income effect (which he cannot directly observe), which will amplify the affect by leading to lower consumer discretionary income and retail purchases writ large.

    In short, short this stock will be a good place to be from this point forward. I am going DITM longer term puts after OE so that I don't have to worry about any near term squeezes.

48.34-0.33(-0.68%)Nov 26 4:00 PMEST

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