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LuLulemon AthleticaCreated By: Amanda Brunssen, Chris
Fleischmann, Sam Heston, Sean Lewis & Haley Muir
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
Overview
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
Industry & Description
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
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
Company Background Cont.
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
Economic Overview
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
Spending on yoga currently around 6 billion dollars Yoga Journal
Niche Good quality Brand name Loyal customers
Industry Outlook
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
Competitors
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
Why Lululemon is the Leader!
Mean target: 79.63 Median target: 83 High target: 100 Low target: 46 Number of brokers: 16
Price Estimates
Financial RatiosLiquidity Ratios
Lululemon Athletica Nike
2011 2010 2009 2011 2010 2009
Current Ratio 4.56 3.69 2.58 2.85 3.26 2.97
Quick Ratio 3.89 2.94 1.43 2.17 2.65 2.25
Industry
3.2
2.1
Asset Management Ratios
Lululemon Athletic NikeIndustry
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 Ratios
Lululemon Athletic NikeIndustry
2011 2010 2009 2011 2010 2009Debt Ratio 21.81% 24.13% 26.83% 34.37% 32.35% 34.39% 38.00%
Profitability Ratios
Lululemon Athletic NikeIndustry
2011 2010 2009 2011 2010 2009
Operating Margin 25.60% 19.19% 17.25% 13.49% 13.08% 13.05% (NA)
Profit Margin 17.12% 12.87% 11.13% 10.22% 10.03% 7.75% 9.21%Basic Earnings
Power 36.48% 28.29% 28.81% 18.76% 17.25% 18.89% (NA)
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%
Market Ratios Lululemon Athletic Nike
Industry2011 2010 2009 2011 2010 2009
Price/Earnings 79.78 68.88 21.42 19.24 18.75 14.44 27Market/Book 16.37 6.74 1.58 3.8 3.26 2.57 5.43
Analysis of RatiosCurrent Ratio – Helps determine how much is available in cash or near cash items to meet
current obligations
Quick Ratio – Can the firm meet it’s short term obligations relying on only near cash
assets
Liquidity RatiosLululemon Athletic Nike
Industry2011 2010 2009 2011 2010 2009
Current Ratio 4.56 3.69 2.58 2.85 3.26 2.97 3.2Quick Ratio 3.89 2.94 1.43 2.17 2.65 2.25 2.1
Analysis of Ratios (continued)
Are we generating an adequate return based on sales and total investment?
Profitability Ratios
Lululemon Athletic NikeIndustry
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)
Helps assess the firms performance relating our fundamental goal of stock price maximization to internal numbers effected by managerial decisions.
Market Ratios
Lululemon Athletic NikeIndustry
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
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?
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
Top Three Reasons to Buy this Stock