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Lululemon Athletica Inc - Stock Quote LULU

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Morningstar's Lululemon Athletica Inc Stock Analysis

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Narrow-Moat Lululemon’s Long-Term Plan Looks Familiar, Targets Look Reasonable; Shares Overvalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

As part of an analyst event, narrow-moat Lululemon unveiled a long-range plan, “Power of Three x2,” with the same broad goals as 2019’s (successful) original “Power of Three” plan: doubling e-commerce and men’s sales and quadrupling international sales in five years. Overall, the firm projects 15% compound average annual revenue growth between 2021 and 2026 with some operating margin improvement and annual EPS growth above 15%. While these are laudable goals for any apparel retailer (and Lululemon’s guidance is often conservative), they are not much different than our five-year expectations of 13.4% and 18.9% compound average annual growth in sales and EPS, respectively, and operating margins that expand to 24.1% from 21.3%. Possibly because investors were hoping for more aggressive targets, Lululemon’s shares dropped about 4%. While this downturn could certainly reverse, we still believe its shares, trading at about 40 times projected 2022 EPS of $9.30, are priced too high given the ever-increasing competition in the athleisure space. Our fair value estimate remains $208 per share.

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Lululemon Athletica Inc's Company Profile

Business Description

Lululemon Athletica Inc. designs, distributes, and markets athletic apparel, footwear, and accessories for women, men, and girls. Lululemon offers pants, shorts, tops, and jackets for both leisure and athletic activities such as yoga and running. The company also sells fitness accessories, such as bags, yoga mats, and equipment. Lululemon sells its products through more than 570 company-owned stores in 17 countries, e-commerce, outlets, and wholesale accounts. The company was founded in 1998 and is based in Vancouver, Canada.

1818 Cornwall Avenue
Vancouver, BC, V6J 1C7, Canada
T +1 604 732-6124
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Jan 31, 2022
Fiscal Year End Jan 29, 2023
Stock Type Cyclical
Employees 29,000

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