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Lululemon Athletica Inc LULU

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Narrow-Moat Lululemon’s Q1 Upside Surprise Was Not Surprising; Shares Very Overvalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

As it has done consistently over the past three years, narrow-moat Lululemon outperformed analysts’ expectations in 2021’s first quarter and lifted its guidance. Apart from the firm’s own momentum, conditions were exceptionally good for the United States apparel industry in the quarter as government stimulus, vaccinations, and limited discounting boosted sales and margins. Thus, we expect to raise our $166 per share fair value estimate on Lululemon by a high-single-digit percentage. However, at a P/E of about 45 times on 2021 earnings, we view its shares (little changed in post-market trading) as very overvalued.

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Company Profile

Business Description

Lululemon Athletica Inc. designs, distributes, and markets athletic apparel 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 500 company-owned stores in 17 countries, e-commerce, outlets, and wholesale accounts. The company was founded in 1998 and is based in Vancouver, Canada.

Contact
1818 Cornwall Avenue
Vancouver, BC, V6J 1C7, Canada
T +1 604 732-6124
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Apr 30, 2021
Fiscal Year End Jan 31, 2022
Stock Type Cyclical
Employees 25,000

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