Say No To Trading
Public Markets Investor, Opportunistic Buying & Cost-Basis Management
Lululemon looks headed out of business as its customers move to Alo, and another earnings report hammered the stock. Suburban women now wear Alo, at least until they switch to the next shiny brand in a few years, which is why retail apparel is not a long-term investment. x.comÂ
Lululemon is no bargain at $99 and an 8x P/E, with revenue shrinking 4% and guidance slashed in two consecutive quarters. x.comÂ
Lululemon is an 800lb gorilla worth defending despite bad management and the politics around its skin-tight leggings. x.comÂ
Lululemon's problem is its pricing, not a weak consumer. Shoppers are fine but aren't buying its products because the prices no longer make sense, which spells trouble for its margins. x.comÂ
Lululemon's clothing is cheap, poorly made and overpriced, a problem obvious to anyone who has worn its yoga pants, which makes it a poor investment. x.comÂ
Lululemon trading at about 7x earnings is absurdly cheap, among the most mispriced stocks around. x.comÂ
Lululemon, Nike, Under Armour and On look like cursed value traps because rising competition and unpredictable fashion trends keep eroding their positions. Lululemon has lost its niche dominance as the luxury standard and is now one of a dozen rivals, such as Vuori, Alo and Athleta, chasing the same buyers. Lululemon sits at six-year lows, Nike at 12-year lows, Under Armour at all-time lows and On back at 2022 levels. The products may still be good, but competition is overwhelming. x.com x.com … Show more
Lululemon has lost its way. Its brand and products are good, but its market is saturated. x.comÂ
Lululemon is cheap at around 11x earnings with gross margins above 50%, while many people, including the founder, are pushing for a turnaround. Sales growth is tiny, but the balance sheet is solid and the company makes an interesting acquisition target. The reported collapse of talks with founder Chip Wilson, per WSJ via @DeItaone, looks good for the stock: Wilson may try to take it private or bring in a strategic buyer. x.com x.comÂ
Lululemon is not worth bottom-fishing even though the bad news will eventually be priced in, because forward estimates keep falling and a bottom is hard to time before fundamentals bottom. The business is not a zero: its stores are still busy, if less than before. There are better places to look for a bargain. x.com x.com x.comÂ