Lululemon Has Created a 'Cultural Moat' with Unique Marketing - Odlum Brown

Has Lululemon Athletica Inc. (LULU) hit upon the marketing secret for luxury-level profit?

Analyst Barbara Gray at Odlum Brown, who has initiated coverage on the Vancouver retailer’s shares with a Buy rating and a price target of $17, says the yoga apparel company has created a “cultural moat” through its unique marketing program.

Rather than build the brand through traditional mass advertising, Gray notes, Lululemon has built up a loyal following through grassroots marketing initiatives such as holding free yoga classes, providing free yoga wear to teachers, and using social media “to create brand buzz among its current cult of ambassadors and customers."

Ms. Gray said in a note to clients:

Even though its shares trade at a premium to those specialty peers, the company’s average sales per square foot, at C$1,400, are “more than three times higher” than the C$425 square foot level of its peer U.S. specialty apparel retailers.

We believe the company has both the financial and operational capacity to enable its highly experienced management team to grow Lululemon into a leading global athletic apparel company.

Comments

[User 295337:]

disclosures?

i would think that for a company selling consumer discretionary clothing, it's a good thing they have that moat...with a forward P/E of nearly 20, ttm P/S of 2.3, and a stock price that's been looking like a 2-3x leveraged S&P 500 ETF....

Jul 10 03:09 PM

[Sovestor:]

Nothing is unique about it. One can go to Wal Mart and get the same thing at much cheaper price.

Jul 13 02:19 PM

[FiaPoko:]

Never underestimate the stupidity of the consumer. Yes, you can buy the same thing at wal-mart for $12 that you pay $95 for at lululemon. But it doesn't have the logo and there has always been a huge pool of idiots willing to pay for a logo. Nike is the traditional example.


On Jul 13 02:19 PM Sovestor wrote:

> Nothing is unique about it. One can go to Wal Mart and get the same
> thing at much cheaper price.

Jul 13 03:42 PM

[CrazyFkr:]

Once the high-school fad is over then only people who are actually active will have any interest in their product. My guess is this back to school season should achieve that and stock price will fall accordingly. This stock has seen its high for the next year at least I think.

FiaPoko, never overestimate brand loyalty of a teenager, if anybody did market research i bet there are more lululemon items in highschool then there are in any activity icluding yoga for which they were designed.

Aug 18 12:42 PM

[CrazyFkr:]

FiaPoko, I forgot to mention it is not an equal comparison to make between Nike and Lululemon if for no other reason than that Nike has made itself a leader in professional sports venues such as NHL hockey and NFL football....maybe I have missed something but I didnt notice the Lululemon commercials during any national yoga championships this year. These companies are on a different level totally.

Aug 18 12:47 PM