LuLulemon Athletica
Created By: Amanda Brunssen, Chris Fleischmann, Sam
Heston, Sean Lewis & Haley Muir
Overview
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Industry & Description
Company Background
Annual Earnings, Quarterly Earnings, Stock Performance
Economic Overview
SWOT
Industry Outlook
Competitors
Leader
Price Estimates & Financial Statement Analysis
Shareholder Questions
Top Three Reasons to buy this stock
Industry & Description
 Industry: Textile- Apparel Clothing
 Distributes athletic apparel for women, men and female
youth  increased athletics among women
 Apparel includes fitness pants, shorts, tops, and jackets for
healthy lifestyle activities, such as yoga, running and general
fitness
 Accessories include bags, socks, underwear, yoga mats,
instructional yoga DVDs, and water bottles
 47 stores in Canada, 108 in the US, 18 in Australia and 1 in
New Zealand
Company Background
 Key managers
 CEO- Christine Day
 CFO- John Currie
 Executive Vice President, Retail Operations North America- Delaney
Schweitzer
 Executive Vice President, Chief Product Officer- Sheree Waterson
 Chairman of the BOD- Dennis Wilson
 Competitive Advantage
 No long-term debt
 Loyal customers
 High-quality products
 Strong/popular industry
 Fast-growing company  brings more popularity
 How long have they been around?
 Founded: 1998 in Vancouver, Canada
 IPO= 2007
Company Background Cont.
 What is their market cap?
 10,920,000,000
 How has the stock performed?
 Increased by 26% last quarter
 Vs. 4-5% by competitors
 Any splits coming up?
 2 for 1 on 7/11
 Nothing currently scheduled
 Any dividends?
 N/A
Annual Earnings
Quarterly Earnings
Stock Performance
Economic Overview
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GDP: Growth of 2.3 % in 2012
Unemployment: Around 8% by ‘13
Interest rates: little or no increase
Inflation: 2% in ‘12
Retail sales: 6% growth in ‘12
SWOT
Strengths
 High quality products and a
successful connection with
the yoga/fitness community
 Higher quality= higher prices=
more money
 Considered the ‘unofficial
sponsor’ of yoga
 Yoga class provided by
Lululemon shows customers
that it fully believes in using
yoga as a form of physical
activity
 Brand loyalty
Weaknesses
 Not enough stores for
personal selling
 Limited store locations means
more customers have to
order online, and aren’t able
to fully experience the
Lululemon experience.
 Not diversified
SWOT Cont.
Opportunities
 Innovation  For
example, expansion
on men’s line
 Expand
internationally
Threats
 May lose customers
to competitors when
the economy is down
due to high prices
Industry Outlook
 Spending on yoga currently around 6 billion dollars
 Yoga Journal
 Niche
 Good quality
 Brand name
 Loyal customers
Competitors
 Nike  comparing to Lulu with rates
 Nikes market is saturated
 Others:
 Under Armour
 Doesn’t reach out to the yoga market
 Doesn’t reach out to women
 Women buy more
Why Lululemon is the Leader!
 The company has run off nine straight quarters of
double-digit sales and earnings growth
 It passed $1 billion in annual revenue last year, up
from $453 million only two years earlier
 Loyal customers
Price Estimates
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Mean target: 79.63
Median target: 83
High target: 100
Low target: 46
Number of brokers: 16
Financial Ratios
Liquidity Ratios
Lululemon Athletica
Nike
Industry
2011
2010
2009
2011
2010
2009
Current Ratio
4.56
3.69
2.58
2.85
3.26
2.97
3.2
Quick Ratio
3.89
2.94
1.43
2.17
2.65
2.25
2.1
Asset Management Ratios
Lululemon Athletic
Nike
Industry
2011
2010
2009
2011
2010
2009
Inventory Turnover
12.38
10.28
6.79
7.68
9.32
8.14
4.2
DSO
4.68
6.64
4.16
54.9
50.87
54.89
(NA)
Fixed Asset Turnover
8.58
5.72
4.23
6.93
6.78
6.72
(NA)
Total Asset Turnover
1.43
1.47
1.67
1.39
1.32
1.45
1.3
Financial Ratios (continued)
Debt Ratio
Debt Ratios
Lululemon Athletic
Nike
Industry
2011
2010
2009
2011
2010
2009
21.81% 24.13% 26.83% 34.37% 32.35% 34.39% 38.00%
Profitability Ratios
Lululemon Athletic
2011
Operating Margin
Profit Margin
Basic Earnings
Power
ROA
ROE
2010
2009
Nike
2011
2010
2009
25.60% 19.19% 17.25% 13.49% 13.08% 13.05%
17.12% 12.87% 11.13% 10.22% 10.03%
7.75%
36.48% 28.29% 28.81% 18.76% 17.25% 18.89%
Industry
(NA)
9.21%
(NA)
24.40% 18.97% 18.60% 14.22% 13.22% 11.22% 12.60%
31.21% 25.00% 25.42% 21.67% 19.55% 17.10% 18.98%
Market Ratios
Lululemon Athletic
Price/Earnings
Market/Book
2011
79.78
16.37
2010
68.88
6.74
2009
21.42
1.58
Nike
2011
19.24
3.8
2010
18.75
3.26
2009
14.44
2.57
Industry
27
5.43
Analysis of Ratios
Current Ratio – Helps determine how much is available in
cash or near cash items to meet current obligations
Liquidity Ratios
Lululemon Athletic
Current Ratio
Quick Ratio
2011
4.56
3.89
2010
3.69
2.94
2009
2.58
1.43
2011
2.85
2.17
Nike
2010
3.26
2.65
Quick Ratio – Can the firm meet it’s short term obligations
relying on only near cash assets
2009
2.97
2.25
Industry
3.2
2.1
Analysis of Ratios (continued)
Are we generating an adequate return based on
sales and total investment?
Profitability Ratios
Lululemon Athletic
Nike
Industry
2011
2010
2009
2011
2010
2009
Profit Margin
17.12%
12.87%
11.13%
10.22%
10.03%
7.75%
9.21%
ROA
24.40%
18.97%
18.60%
14.22%
13.22%
11.22%
12.60%
ROE
31.21%
25.00%
25.42%
21.67%
19.55%
17.10%
18.98%
Analysis of Ratios (continued)
Market Ratios
Lululemon Athletic
Nike
Industry
2011
2010
2009
2011
2010
2009
Price/Earnings
79.78
68.88
21.42
19.24
18.75
14.44
27
Market/Book
16.37
6.74
1.58
3.8
3.26
2.57
5.43
Helps assess the firms performance relating our fundamental
goal of stock price maximization to internal numbers effected
by managerial decisions.
Questions for Shareholder
 How long do you expect to maintain a 30% yearly sales
increase?
 What are your international expansion plans?
 From your experiences, does Lulu perform well during
economic downtime?
 How can you compete with other companies who price
their yoga pants at lower prices? Do you think some people
deter away from Lulu, because of your higher prices?
 What are some new products coming out?
 At 58.5 and 10.7 P/E and Price/sales, respectively lulu is
considerably high compared to the industry at 25 P/E and
3.0 price/sales. What steps is Lulu taking to bring in more
sales and earn more to lower these ratios?
Top Three Reasons to Buy this Stock
 Fast-growing stock
 26% last quarter
 No long-term debt
 Bright future  spending in the retail market is
increasing  yoga market is currently at 6 billion
 Recommendation  buy, and hold
Sources
 http://www.kiplinger.com/businessresource/economi
c_outlook/
 Lulu Annual Report
 http://shop.lululemon.com/home.jsp
 http://investing.money.msn.com/investments/keyratios?symbol=lulu&page=FinancialCondition