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Is Lululemon Athletica a buy?

It’s time to break down an apparel name that has taken the world by storm. Here is the breakdown on $LULU, otherwise known as Lululemon Athletica.

Current Price: $353.46

52/Wk High: $399.8965

52/Wk Low: $128.845

Market Cap: $43.01 billion

Read below for the breakdown!

Lululemon Athletica is a major designer and manufacturer of athletic apparel and accessories.

Breaking the stock price down according to TREFIS (@trefis) data 66.5% of the stock price is based on the company’s Direct to Consumer segment.

Furthermore, 30.5% of the stock price is based on their retail stores segment, 1.8% on their wholesale, franchise, and other segment, and 1.1% is based on cash.

Digging into the numbers Lululemon beat Q3 expectations with an EPS of $1.16 versus the analyst’s EPS consensus estimate of $0.88.

The company also reported a net revenue increase of 22%, bringing net revenues to a whopping $1.1 billion. Breaking down the revenue growth net revenues grew 19% in North America, while net revenues grew 45% internationally.

Taking a look at sales, total comparable sales grew by 19%, with direct to consumer net revenues increasing by 94%. On the flip side, comparable store productivity came in at 83%, representing a store sales decline of 17%.

Profit increased as well, with gross profit increasing 24% to $627.4 million as well as gross profit rising to 56.1%.

Operating income increased as well by 17% to $204.9 million but operating margin declined to 18.3%.

Management was upbeat about the quarter and the company’s performance.

“Our performance this quarter was driven by strong omni momentum, with notable strength in conversion and increased traffic to our e-commerce sites,” CFO Meghan Frank said.

On the downside, management did not deliver guidance due to the pandemic, a major factor in the market’s reaction to earnings.

While Lululemon did not provide guidance the company announced that the company’s board approved an increase of share repurchases from a minimal $263.6 million to $500 million.

Taking a look at the balance sheet the numbers continue to impress.

Total Debt: None

Total Liabilities: $1.465 billion

Total Assets: $3.628 billion

Cash & Short Term Inv: $482 million

While the numbers are great, the valuation has increased heavily.

Price to Earnings: 80.89x

Price to Sales: 11.03x

Price to Book: 21.58x

Price to Cash Flow: 58.07x

On a performance basis, management has done quite well.

Return on Equity: 29.23%

Return on Assets: 17.19%

Return on Invested Capital: 21.52%

Given the numbers the analysts remain quite bullish on $LULU with the mean price target sitting at $403.56/share, representing a 15.10% upside.

It is also important to note that the high price target is $500.00/share, representing a 42.16% gain, while the low price target is $275.00/share, representing a -21.81% loss.

The big money is also quite involved with 86.90% of $LULU being owned by institutions. Top holders include Fidelity Management & Research, The Vanguard Group, and T. Rowe Price Associates.

On a technical basis, Lululemon could be flashing opportunity. According to the six-month charts, the MACD has recently entered a downward momentum direction with a range of 8.09 down to 5.76.

The six-month charts are also indicating an RSI of 48.59 and CCI of -49.57, both of which are on the low end. It is also important to note that $LULU currently trades a ways off its highs.

In short, Lululemon Athletica is a solid long term investment in my opinion given rising US apparel sales, Lululemon’s consistent growth, and the ongoing digital e-commerce shift in which $LULU is capitalizing on.


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.

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