{"id":357805,"date":"2010-02-24T08:25:00","date_gmt":"2010-02-24T13:25:00","guid":{"rendered":"e2249889-c78b-43e3-9643-b1d7d4aa587b:399927"},"modified":"2010-02-24T08:25:00","modified_gmt":"2010-02-24T13:25:00","slug":"dont-bet-against-lulu","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/357805","title":{"rendered":"Don’t bet against Lulu"},"content":{"rendered":"

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Shares of Lululemon Athletica Inc<\/a>. have risen more than 300% in the past year and investors continue to show confidence in the yoga apparel retailer\u2019s future growth prospects. However, the stock has fallen back slightly in the past few days after a negative Wall Street Journal\u2019s Heard on the Street column<\/a>.<\/p>\n

John Jannarone argues that future cannibalization and competitive threats are primary obstacles to Lululemon\u2019s growth.<\/p>\n

\u201cProfitability will likely suffer more as Lululemon ventures beyond its concentration in major cities to the heartland, where incomes are lower,\u201d he wrote.<\/p>\n

Mr. Jannarone also noted that industry veterans such as Victoria\u2019s Secret and Adidas have entered Lululemon\u2019s market, offering similar products at lower prices. \u201cThat could threaten sales even in top-selling stores in high-income metropolitan areas,\u201d he said.<\/p>\n

Given Lululemon\u2019s low penetration in the United States, those issues are still far off, according to Howard Tubin, analyst at RBC Capital Markets. He also highlighted the company\u2019s continued strength in far less populous Canadian markets, such as the Greater Toronto Area.<\/p>\n

In terms of competition, Mr. Tubin said Lululemon has defended well against lucy activewear inc., which was considered the company\u2019s primary competition in 2007. Nike also pushed harder into women\u2019s yoga, but pulled back on its efforts subsequently, and Limited Brands\u2019 La Senza Spirit test banner has not been expanded in Canada.<\/p>\n

The Wall Street Journal article also cited estimates that Lululemon\u2019s U.S. stores are less productive that Canadian ones. Mr. Tubin noted that this should be expected as U.S. stores mature. However, with chain-wide productivity well north of $1,000 per square foot, the analyst feels this is a \u201chigh quality\u201d problem that most retailers would envy these days.<\/p>\n

\u201cWith the stock\u2019s sharp recovery and a moderating market environment, the emergence of these valuation-questioning stories is unsurprising given the large short interest in the stock,\u201d the RBC analyst told clients. \u201cWhile a little weakness is not unexpected with these types of articles in a moderating market, we would be very hesitant to bet against Lululemon right now given the opportunities for positive developments ahead.\u201d<\/p>\n

Jonathan Ratner<\/a> <\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Shares of Lululemon Athletica Inc. have risen more than 300% in the past year and investors continue to show confidence in the yoga apparel retailer\u2019s future growth prospects. However, the stock has fallen back slightly in the past few days after a negative Wall Street Journal\u2019s Heard on the Street column. John Jannarone argues that […]<\/p>\n","protected":false},"author":4059,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-357805","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/357805","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4059"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=357805"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/357805\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=357805"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=357805"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=357805"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}