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Why To Avoid Lululemon
This stock was trading in the 3-4$ range in 2009, and each of your 4 points were just as valid then as they are now. Since the stock has risen to the $50-$60 range, it is safe to say that you have severely misunderstood this company. I find this to be very common amongst male investors who have not taken the time to understand the clientèle. Here are why your 4 points are invalid:
1) Imitation: It absolutely has a sustainable competitive advantage. That competitive advantage arises from the community they have developed, the experience associated with shopping at LULU, and their marketing strategy that is focused solely on women. As the CEO has explained, the company plans to grow its male business but not through marketing. Fitness clothing advertising to men and to women are very different, and in order to maintain the community and spiritual feelings with the company, they can't advertise to both at the same time. Their competitors rely to heavily on male products.
2) They are not really a Yoga company, they sell fitness clothing for women. That is not a fad. Running clothes are growing as a portion of their business. Also, they have been rapidly expanding their dance clothes offering, which is said to be the newest women fitness fad.
3) Insane to speak of saturation with a company that only has a little over 100 stores....
4) The company focuses sales on intelligent empowered women, which definitely appeals to a wealthier consumer. On top of this, the company has excelled in recession, often by changing their offerings. For example, they sold more running clothes during the recession, (which they predicted and subsequently increased inventory in said products), because people tend to cut their gym memberships during recessions and instead focus cheaper alternatives...running.
Dec 5 12:16 AM
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