I sat down this morning to write an article and was having a little bit of writer's block. Then It hit me. As I was sitting in my Lululemon shorts, comfortable as ever, why not write about the company's historic rise?
Back in my freshman year of high school, I bought my first pair of Lululemon shorts, and they have been my trusted brand for clothes ever since. With ABC technology (Anti Ball Crushing), and some of the best fabric, guys around the world love their shorts. Along with their shorts, they have an extensive line of polos, workout gear, and much more.
But it wasn’t always like this.
The Simple Thesis: Back in 2014 when I bought my first Lululemon product, I realized in school that it wasn’t a very popular mens brand. Kids made fun of me for shopping at the “women’s yoga company”, and yes I know what a stupid thing to make fun of someone for. Funny thing is, in the next 4 years, 75% of these kids owned Lulu apparel. Simple as it is, the reason I believe Lulu went from $40 in 2014 to over $300 today is due to their men's line.
Lululemon used to be known as the “women’s yoga company”, but now I think we can all say that it is the leader in uni-sex athleisure clothing. In fact, I think the brand still has more room to grow in the men’s section based on recent earnings reports. During earnings in December 2019, Lulu reported, “total revenue for men's apparel grew 38% in the third quarter” and “21% of Lululemon's $3.3 billion in sales last year came from men's products”. Clearly, the men’s line is growing quickly, yet women still account for 79% of all sales. In the most recent 10k, Lulu stated, “Our business is growing as more men discover the technical rigor and premium quality of our products, and are attracted by our distinctive brand”.
The company has a goal to double its men’s business by the end of 2023. With such a high share price already, could it go even higher? Maybe $500 per share?
The Financial Thesis: I mean talk about profitability. Lululemon has one of the best profitability scores throughout the market according to EEON. Let me tell you, I love profitability because in my mind that means innovation. When you are making a profit like Lulu is, you are able to spend it on research, product innovation, and new investments. This in turn, can result in awesome growth. Think about it, a company barely making a profit isn’t going to want to take a risk to change their business strategy around, they just want to pay the bills.
Conclusion: In the end, this is all my personal opinion from my observations in the past 5 years. I love Lululemon clothing and I believe their men’s line is going to continue to grow over the next few years. I can easily see LULU being $500/share by 2022.