SHORTS BEWARE!!! BETTING AGAINST COMPANIES THAT DISPLAY EXCEPTIONAL ECONOMICS LIKE THIS IS LIKE BETTING AGAINST BUFFET. YOU ALWAYS LOSE!!!
I am amazed at how many shorts are so short sighted. Just a matter of time before they get burned. Yes, it trades at a premium multiple but it is well deserved. Shorts are playing with fire here for it is just a matter of time before the stock returns to 70. Here's why:
1. ROIC and ROE above 30 consistently. Best of breed, which means management is fantastic at allocating capital (Not just Christine Day). NEVER bet against a company that displays these kind of numbers. You will lose eventually. These companies are like cockroaches you can't kill...they always come back.
2. NO DEBT...they are small and nimble and make course corrections and can make adjustments to their game plan as needed.
3. Even with slight margin contraction due to Luon issues this quarter, they are STILL higher than peers.
4. INTERNATIONAL EXPANSION: They are barely tapping into China and other countries. A major portion of their growth lies ahead.
5. The quality of fabric (with one notable exception) they use and the comfort of their clothes is extremely attractive to men and women alike. Athleta is no competition. It's like comparing a Honda to a Mercedes. People who drive Mercedes will ALWAYS drive Mercedes.
6. What if they make a major CEO announcement in the near future with a CEO who is fantastic and has strong track record creating a great culture and taking companies to the next growth phase. This thing could pop back to 75 so fast that shorts would have to clean their shorts BEFORE THEY EVEN COVER.
7. Not NEARLY saturated in affluent markets in the U.S.. Demand is there. I was at Fashion Valley Mall in San Diego yesterday. Lots of people with money shop there. They've got Coach, Michael Kors, Ugg, Ecco stores, etc....BUT GUESS WHAT???? NO LULULEMON....YET....Folks, this is just the beginning of the next phase of the BEGINNING. BE AFRAID SHORTS, BE VERY AFRAID.
Bottom line: Never bet against companies that have the Midas Touch...they always have providence and angels on their side
Yeah, I'm sure in a struggling world wide economy that there are tons of new people looking to be this overpriced yoga gear from a company that just had a major quality issue. Me thinks they have an uphill climb vs. even their current valuation.
Your argument appeals to emotion more than logic. 5 years of stellar numbers in the worst economic crisis since the great depression tells me you are wrong. They don't need "tons" of people....they enough people and the right people buying the product to continue their growth trajectory. Maybe you forget, they appeal to the affluent who are not affected as much by macro concerns. The numbers prove it. Their quality issue was a one time, solvable problem and they handled it well all things considered. I'll come back to say thank you when I sell at 70.
Exactly...I met with an affluent friend on Friday who has owned high end retail franchises and has been wearing lululemon clothes for years. He buys because of the QUALITY. HE WOULD NEVER BUY A KNOCK OFF HE SAID. He didn't even know who the CEO was. MAIN STREET (THE PEOPLE WHO BUY LULULEMON'S CLOTHES) DOESN'T CARE ABOUT THESE THINGS. When this hits 70 I am going to come here and thank the shorts for this gift and the money they have so graciously given to me.