M&M Lion Fund
Small-Fund Portfolio Manager Since 2023, IE Business School & Javeriana Background
Lululemon's weakness is structural, and consumers may also be tightening budgets for aspirational purchases across apparel. The same slowing-sales trend showed up at other brands this quarter, and heavy wholesale promotions were flagged on the On and Amer Sports calls, making apparel a tough industry to invest in. x.comÂ
Lululemon's core categories such as leggings fell 20%, and it is unclear whether that reflects a fashion shift toward baggy workout clothes or consumers buying better-value leggings elsewhere. With On and Deckers also sharply down, some broader consumer weakness looks likely. x.com x.comÂ
Lululemon is a stock to avoid around earnings, good or bad, as apparel names almost always are. Too many investors were fooled by its compounder story coming out of Covid. x.comÂ
Lululemon's 18% premarket drop looks like an overreaction given its improving margins. 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, 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 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
If conditions are this tough for On Holding, the rest of the apparel and footwear space, including Lululemon and Nike, is likely faring worse. x.comÂ
Nike and Lululemon show why apparel brands almost always belong in the too-hard pile. Consumer tastes change on a whim and are hard to model, and missteps in keeping up can be the beginning of the end even for the hottest, most beloved brands. A new shirt is among the first things people cut, and structurally growing beyond brand awareness and store runways is extremely difficult. There are better places for time and money. x.comÂ
Lululemon is an 800lb gorilla worth defending despite bad management and the politics around its skin-tight leggings. x.comÂ
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
