Shares of Lululemon Athletica have been sheered of late, you can now see through them, as they’ve been chopped down about ten points after they reported a weaker than expected outlook.
Would I buy shares of Luluemon at $70 a share? Maybe, but I’d much rather than buy those shares when they’re just under $60, which is the case now. You can’t even buy their Yoga pants for that price.
So this might just be the time to step in and buy shares of the Yoga pants maker on a discount. Why? Because Lululemon is part of a wider trend in eating healthy and taking care of oneself – exercising and eating right does the body good. If you think the trend that has made Whole Foods and Chipotle shares rise the past few years is going to continue, then shares of Lululemon should follow this trend. It’s all about not only taking care of yourself but also a concern about the world around you. The trend is to eat better, workout more, and think about how what you do impacts the environment.
Take their sustainability message, which applies to their stores energy use and their products:
“We always design with quality in mind. Our products are designed to last five years of intended use, which reduces the environmental impact over the product lifecycle.”(Lululemon)
Here’s a look at Google Trends for the Lululemon search term. To me, I think the trend in Lululemon is going to continue. It’s still a young brand that’s not going to all of a sudden go away.
Buying shares of Lululemon give you a chance to share in the growth of the company in the coming years. Right now Lululemon is mainly focused in the United States and Canada. If their new CEO can lead a global expansion of the brand, then there’s still great potential for the company. The question I’d ask right now is: can one buy Lululemon pants online if you live in Brazil or Spain? And better year, are Lululemon pants and gear popular internationally? In stores in San Francisco and New York, are tourists from China or Europe buying their products? Right now, minus a few stores in China (5), Germany (4), Netherlands (1), New Zealand (5), Singapore (2), and the United Kingdom (4), you have to be in Canada or the United States if you really want to go to an actual physical store. The bulk of the stores are in the U.S. and Canada with stronger growth in Australia. This shows there a lot more room for them to grow internationally.
While the founder of the company certainly put his foot in his mouth when he said some women shouldn’t wear Lululemon clothes, the company has forced him out more or less. They want to move on. It would be more worrisome if the founder stuck around and tried to ameliorate things – that usually doesn’t work. It’s better to start fresh and move on. It seems like they’ve found the right CEO who shares the companies underlying theme of taking care of oneself and making products that are environmentally positive.
At some point soon, Laurent Potdevin, Lululemon’s new CEO, will have to publicly address all the issues surrounding Lululemon, from the see-through pants controversy to the founder saying fat women shouldn’t wear our Yoga pants. These aren’t small items to deal with. They will have to be handled to perfection. Potdevin, who worked at TOMS, Burton, and Louis Vuitton, must hold the skill, talent, and experience to handle the bad press, otherwise Lululemon wouldn’t have hired him.
But the main thing is the product is well made and women want to buy them. If you have a pair of Yoga pants that make your butt look good, aren’t you going to keep buying those pants? There’s all this talk about the founder making those poor comments or the pants being see through, it’s hurt the stock but it’s not going to stop women from buying the pants they like. Check out the smile on this women’s face as she burns up money at Lululemon:
And, they’re selling Yoga pants. While Lululemon has shot themselves in the foot a few times now with the CEO’s remarks and the see-through pants, it’s relatively a simple product they are selling. We’re not talking about a biotech company that needs FDA approval for their weight loss drug. They’re selling Yoga pants for Namaste’s sake. But Lululemon is the “butt” of many jokes when anyone is caught with see-through pants, even NFL players:
Lululemon is so popular they didn’t even have any sales on Black Friday. Even Apple had some discounts. The overall point is that Lululemon is still in its early stages of growth. Nike, Under Armour are chasing them – they didn’t get the Yoga pants popularity memo early enough.
In a way, Lululemon reminds me of Apple reminds a bit, since their products are sold used for a fairly good price on websites such as eBay or other online marketplaces. To think someone would want to buy a used pair of Yoga pants or bra is surprising, but goes to show you how strong the brand is. And, all the talk about Lululemon stores is they’re packed, like Apple stores.
Moreover, the founder who said that some people weren’t meant to wear Lululemon, also said they were more of a technology company, in terms of how they combine the different materials together to make their products. The integration of wearable electronics is going to enhance this idea of a tech company, and probably isn’t too far away. Lululemon will most likely dive into this aspect of measuring fitness levels and health. There’s also the idea of “enclothed cognition”, where if you wear certain things you actually feel better and are more likely to workout if you wearing a pair of Yoga pants. Plus, don’t you want to be able to continue to wear these tight Yoga pants so you keep working out?
After all the bad press and the stock down more than ten points, it might be time to start building a position in Lululemon. Heck, they’re even now doing live yoga at their stores:
— Jeff Macke (@JeffMacke) December 22, 2013