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.


EAT - SLEEP - PROFIT


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