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Lululemon: Making The Next Nike

Jun. 05, 2020 10:35 AM ETLululemon Athletica Inc. (LULU)24 Comments


  • In 2018, Lululemon announced a 5-year plan to double its menswear revenue and quadruple its international revenue by 2023. It has been executing this plan successfully.
  • The company has set about on a path that seems to be oriented towards "sustainable growth" instead of "reckless growth at all costs".
  • This should be extremely heartening to shareholders.
  • The company's success in international markets, namely China, also portends share price appreciation in the future.
  • I rate Lululemon a hold presently, though long term, I am bullish on the stock.
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Source: Lululemon's 2019 Analyst Day

Investment Thesis

Lululemon (NASDAQ:LULU) is an athletic retailer that employs a "premium pricing model" in which the company creates desire for its products through relative scarcity and higher prices. As we all know, this model has seen immense success for companies, such as Apple (AAPL) or Tesla (TSLA). To this end, the company has positioned itself as the leader of the secular health and wellness trend through its well-designed products and winning brand strategy.

Source: Lululemon's 2019 Analyst Day

As can be seen above, Lululemon believes that there is a $3 trillion global wellness market on which it can thrive. The company has historically focused on making women's yoga and athletic wear, which has been very successful and will continue to drive revenue for the business.

However, the company has its sights set on diversification of revenues and the conquering of international markets. Such a focus should prove to be a winning strategy, whereby the company will derive further growth, and therefore, drive the share price (and free cash flow per share) higher.

Today, I will explore the progress of these new revenue-generating channels; after which, I will provide a valuation for the company.

Source: Lululemon's 2019 Analyst Day

Lululemon's Appeal to Men

While brands like Nike (NKE) and Under Armour (UA) have been historically menswear companies and are currently focusing on targeting female customers, Lululemon has been historically a women's brand and is now focusing on men.

And the strategy seems to be working. Lululemon offers the best of both worlds: extremely comfortable clothes that are designed as activewear but intended to give a casual look, so it's natural that anybody should like them.

For example, the ABC pants are innovative and have been a bestseller (if you're not sure what ABC stands for, click the

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This article was written by

Louis Stevens profile picture
A community achieving financial freedom through visionary investing
I buy businesses I like, then hold them with a long term time horizon.

Some credentials of mine: Former U.S. Army Officer, Political Science Florida Atlantic, MBA University of Florida, inventor of the L.A. Stevens Valuation Model.

Analyst’s Disclosure: I/we 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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