David Tsao

Lululemon Reduces Guidance; Could Present Buying Opportunity

I wish LULU good luck in proving/proving these lofty valuations going into 2008/2009. Christine Day's experience at Starbucks may not translate over well into women's apparel. I wasn't impressed much with the earnings call as Bob Meers and Christine Day both fielded questions back and forth. If you're going to pass the reigns over, hand it over to the new CEO.

One of the analysts asked an interesting question regarding why the management/personnel changes now, and what LULU was missing prior. Part of the argument put forth by Christine Day, was the hire of Sheree Waterson who has prior e-commerce experience. She does, with enfashion.com during the dotcom days, but those online properties are now defunct. Starting up an online sales channel based on the company's growth strategy and free cash flow position will not be easy and eat into margins. Depreciation of IT systems was estimated at $1.2mm. Pay attention to CapEx and SGA in the coming quarters. Maybe they will outsource this operation... to "try" and keep growth costs down.

time will tell.

Lululemon Athletica: Heading for Single Digits

I couldn't agree with you more. My wife told me about the LuLu store a year ago when we were crusing through the mall, and my first question to her was, "This store only sells yoga chlothes?" This stock turned up in my overvalued screen the other day, and I considered a short position so I asked one of my friends who has used their products what the deal was. This was her response:

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"1) Yoga wear is a fad that is dying with general public, only people practicing yoga will continue to buy and wear it
2) For those who really ARE into yoga, lulu clothing is the yoga gear of choice
3) If they expand to the US, I think they will really appeal to those already practicing yoga, so there is huge potential since it seems as though "everyone's" doing yoga
4) However, Yoga participants have peaked in numbers in my opinion. I think those drawn to yoga have already gotten into it by now and those who aren't into yoga will probably never get into it, so I don't see a lot of "growth" there after they've opened up their US stores and the yoga-ers have made their purchases.
5) Lulu got a mention in Oprah about a couple of months ago (always a good thing) promoting it as great lounge wear or casual wear .
6) There are tonnes of other yoga wear choices and brands although Lulu is the "elite" brand of yoga wear (not a good thing)
7) There is potential for them to continue to grow if they work on new and fresh styles. Right now they seem to be relying on the same basics.

As for me, I own two articles of Lulu that I bought in 2003. Do I see myself buying anymore lulu down the road? Doubt it - maybe one more item at most - I think they're too pricey"