For most investors, how much a stock’s price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.
Another factor that can influence investors is FOMO, or the fear of missing out, especially with tech giants and popular consumer-facing stocks.
What if you’d invested in Lululemon (LULU) ten years ago? It may not have been easy to hold on to LULU for all that time, but if you did, how much would your investment be worth today?
Lululemon’s Business In-Depth
With that in mind, let’s take a look at Lululemon’s main business drivers.
Founded in 1998 and based in Vancouver, Canada, lululemon athletica inc. is a yoga-inspired athletic apparel company that creates lifestyle components. The company designs, manufactures and distributes athletic apparel and accessories for women, men and female youth.
The company offers a line of apparel assortment, including fitness pants, shorts, tops and jackets designed for healthy lifestyle and athletic pursuits, such as yoga, training, and running as well as other sweaty and general fitness under the lululemon athletica brand name. Its fitness-related items comprise an array of accessories like bags, socks, underwear, yoga mats, instructional yoga DVDs, water bottles and other equipments.
The company sells its products primarily in North America through a chain of corporate-owned and retail stores, outlets and warehouse sales, independent franchises, and a network of wholesale accounts. The company has an e-commerce site with an aim to rapidly expand its online business.
The company has entered into license and supply agreements with partners in the Middle East and Mexico, through which they are permitted to operate lululemon branded retail locations in the United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, and Mexico. They also have the rights to sell lululemon products via the company’s e-commerce websites in these countries.
Under these arrangements, the company supplies its license partners with lululemon products, training and other support. While the initial agreement term for the Middle East expires in January 2020, the term for Mexico expires in November 2026.
The company conducts its business through two segments: company-operated stores and direct to consumer.
As of Jul 31, 2022, lululemon operated 600 company-operated stores.
Putting together a successful investment portfolio takes a combination of research, patience, and a little bit of risk. For Lululemon, if you bought shares a decade ago, you’re likely feeling really good about your investment today.
A $1000 investment made in September 2012 would be worth $4,434.10, or a gain of 343.41%, as of September 20, 2022, according to our calculations. This return excludes dividends but includes price appreciation.
In comparison, the S&P 500 gained 166.92% and the price of gold went up -9.05% over the same time frame.
Analysts are anticipating more upside for LULU.
lululemon’s shares have outperformed the industry in the past three months. It reported ninth straight quarter of earnings surprise in second-quarter fiscal 2022, while sales beat estimates for the second straight quarter. The top and bottom-line also grew year over year on continued business momentum, which led to robust sales and an improved operating margin. Comps growth was aided by robust traffic trends in both stores and e-commerce. On a three-year CAGR basis, traffic was up 8% in stores and more than 40% in e-commerce. The company is capitalizing on the importance of physical retail and the convenience of online engagement. Backed by the robust first half performance, the company raised its fiscal 2022 guidance. However, lululemon is grappling with supply-chain woes and higher freight costs, which are likely to hurt gross margin.
The stock has jumped 6.93% over the past four weeks. Additionally, no earnings estimate has gone lower in the past two months, compared to 13 higher, for fiscal 2022; the consensus estimate has moved up as well.
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