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Lululemon Athletica Inc LULU

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Morningstar’s Analysis

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Narrow-Moat Lululemon’s Soft Guidance and Extreme Valuation Overshadow Q2 Outperformance

David Swartz Equity Analyst

Analyst Note

| David Swartz |

As expected, Lululemon’s store sales were affected by coronavirus-related shutdowns in the second quarter of 2020, but 155% e-commerce sales growth allowed it to surpass our sales and profit estimates. However, without offering formal guidance, it was cautious on the second half of the year as store productivity is running at only about 75% of last year. Lululemon’s shares dropped about 6% in post-market trading on this news after a 3% decline in the regular session. We expect to raise our per share fair value estimate of $142 by a low-single-digit percentage but continue to view shares 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 about 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.

1818 Cornwall Avenue
Vancouver, BC, V6J 1C7
T +1 604 732-6124
Sector Consumer Cyclical
Industry Apparel Retail
Most Recent Earnings Jul 31, 2020
Fiscal Year End Feb 2, 2021
Stock Type Cyclical
Employees 19,000