Overview
2020 has created something new for most- working from home and working out from home. Most spend their days in leisurewear, consisting of leggings, sweats, and a t-shirt…but what could be better than that? Even more comfortable athletic wear, and Lululemon takes comfort and style to a whole new level. Not only do they provide apparel for yoga, but also outwear lifestyle, and sports styles. You can wear their apparel on almost any occasion, and many are eager to make a purchase. But let us look at this from a different perspective- do you want to buy one pair of leggings, or do you want to make money off this company’s stock and buy multiple pairs of leggings? I would choose the stock- it has shown the potential of a good buy, and here is why.
Insight
Over the year, the company has seen a lot of growth, and it can be tied to the company branching into other apparel categories, and not just focusing on its niche of yoga apparel. Their revenue has gone from $452 million in fiscal 2009 to $3.98 billion in fiscal 2019. Before the pandemic, the company was showing an opportunity for growth. Revenue had increased by 21% last year, lead by online sales increasing by 35%.
The stock is up 33% and trades at a high price-to-earnings (P/E) ratio. Another thing to note is how the CEO, Calvin McDonald, handled the threat of Covid-19. The company announced the closing of all stores in North America and Europe in March; however, employees would continue to receive full payment for all hours that would have been scheduled. This is an insight into the company’s culture- employees are cared for. This also emphasizes that the company is on the move- there are too many growth opportunities to be laying off employees during a tough time.
What to Do?
So, what do you do? The company is in the early stages of internal expansion- they have had steady growth outside of North America on a small base of operation, meaning there is still a long way to go. Revenue outside of the U.S and Canada has increased steadily, and McDonald stated in his first-quarter call, “Our brand is clearly resonating in our international markets and we continue to believe we can quadruple this business from 2018 levels by 2023.” The company has a high valuation, and its strategy to create a community around the brand has seen success. There is a lot of potentials- watch for any drops in the stock to buy and hold onto.
