Insiders Are Selling Lululemon Athletica

Oct. 7.13 | About: Lululemon Athletica (LULU)

In this article, I will feature one consumer goods company that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria:

  1. The stock was sold by three or more insiders within one month.
  2. The stock was not purchased by any insiders in the month of intensive selling.
  3. At least two sellers decreased their holdings by more than 10%.

Lululemon Athletica (NASDAQ:LULU) designs, manufactures, and distributes athletic apparel and accessories for women, men, and female youth.

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Insider selling during the last 30 days

Here is a table of Lululemon Athletica's insider-trading activity during the last 30 days by insider.

Name Title Trade Date Shares Sold Current Ownership (shares+options) Decrease In Ownership
John Currie CFO Oct 2 20,000 21,147 shares + 10,000 options 39.1%
Christine Day CEO Sep 18 41,041 10,416 shares 79.8%
Delaney Schweitzer EVP Sep 19 36,409 10,134 shares + 6,875 options 68.2%
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There have been 97,450 shares sold by insiders during the last 30 days.

Insider selling by calendar month

Here is a table of Lululemon Athletica's insider-trading activity by calendar month.

Month Insider selling / shares Insider buying / shares
October 2013 20,000 0
September 2013 77,450 0
August 2013 0 0
July 2013 0 0
June 2013 1,402,446 0
May 2013 1,000,000 0
April 2013 0 0
March 2013 0 0
February 2013 0 0
January 2013 300,000 0
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There have been 2,799,896 shares sold and there have been zero shares purchased by insiders this year.

Financials

Lululemon Athletica reported the fiscal 2013 second-quarter, which ended August 4, financial results on September 12, with the following highlights:

Revenue $344.5 million
Net income $56.5 million
Cash $610.3 million
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Outlook

  • For the third quarter of fiscal 2013, Lululemon expects net revenue to be in the range of $370 million to $375 million based on a comparable-store sales percentage increase in the mid-single digits on a constant-dollar basis. Diluted earnings per share are expected to be in the range of $0.39 to $0.41 for the quarter.
  • For the full fiscal 2013, Lululemon expects net revenue to be in the range of $1.625 billion to $1.635 billion and diluted earnings per share are expected to be in the range of $1.94 to $1.97 for the full year.

Competition

Lululemon's competitors include Adidas AG (OTCQX:ADDYY), Nike (NYSE:NKE), and Under Armour (NYSE:UA). Here is a table comparing these companies.

Company LULU ADDYY NKE UA Industry Average (Textile - Apparel Clothing)
Market Cap: 11.09B 23.00B 64.16B 8.56B 411.34M
Employees: 6,383 41,036 48,000 1,900 2.30K
Qtrly Rev Growth (yoy): 0.22 -0.04 0.08 0.23 0.15
Revenue: 1.49B 19.00B 25.81B 2.01B 886.89M
Gross Margin: 0.55 0.49 0.44 0.48 0.36
EBITDA: 442.86M 1.82B 3.99B 264.36M 55.40M
Operating Margin: 0.27 0.08 0.14 0.11 0.05
Net Income: 270.43M 713.38M 2.66B 132.50M N/A
EPS: 1.85 1.71 2.96 1.25 0.08
P/E: 41.32 32.24 24.35 65.15 15.80
PEG (5 yr expected): 2.08 -2.64 2.09 2.72 1.00
P/S: 7.43 1.21 2.49 4.26 0.59
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Lululemon has the highest P/S ratio among these companies.

Here is a table of these competitors' insider-trading activities this year.

Company Insider buying / shares Insider selling / shares
NKE 750 951,314
UA 0 1,086,968
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Only Lululemon has seen intensive insider selling during the past 30 days.

Conclusion

There have been three different insiders selling Lululemon and there have not been any insiders buying Lululemon during the past 30 days. All three of these insiders decreased their holdings by more than 10%. Lululemon has an insider ownership of 0.20%.

There are 12 analyst buy ratings, 13 neutral ratings, and three sell ratings with an average price target of $73.75. Lululemon is trading at a P/E ratio of 41.32 and a forward P/E ratio of 30.74. The company has a book value of $6.76 per share.

Before entering short Lululemon, I would like to get a bearish confirmation from the Point and Figure chart. The three main reasons for the proposed short entry are high P/S ratio, bearish analyst target prices and the intensive insider selling activity.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.