Lululemon Has a Fighting Chance

Lululemon has a fighting chance to take market share from the likes of Nike.

May 27, 2014 at 5:32PM

Lululemon athletica (NASDAQ:LULU) offers investors one of the most unique points of view in the performance-sportswear market after virtually creating the segment more than 10 years ago.

Lululemon is hoping that its brand originality, greater global adoption, and customer loyalty will drive further upside. Granted, there are many competitors in the field, especially global giant Nike (NYSE:NKE), but Lululemon's innovation and unique way of operating show that it won't go down without a fight.

What Nike doesn't offer
Nike is breathing down Lululemon's neck by flexing its financial might. There is nowhere in the world that Lululemon can open a store where it can hide from Nike.

On New York's Upper East Side, for example, Lululemon's store on 66th Street and Third Avenue is one block away from a Nike running store and directly across the street from a Reebok Concept Store.

On top of that, Nike's $5 billion in cash and short-term investments as of Feb. 28 is more than 75% of Lululemon's entire market cap of $6.5 billion. Talk about tough competition.

Lululemon recently introduced a new line of clothing dubbed &Go. The line includes dresses with wicking and breathable fabric as well as tops with cutouts that are lightweight and breathable with sun protection. Also offered are pants that are both appropriate for work and for fitness activities. describes Lululemon's &Go line as "bike and boardroom friendly."

Versatility is a main component of Lululemon's differentiation strategy, which justifies Lululemon's premium prices. Lululemon has its mind set on a customer who requires apparel that is appropriate and durable enough to handle many activities in the same day, while Nike does not advertise its products as having such versatility.

Investors should embrace Lululemon's multi-functional lifestyle-wear, which proves that creativity is embedded in the company's culture.

Forget what the CEO looks like
Lululemon shares fell hard in late April after its new CEO Laurent Potdevin failed to excite analysts during a presentation. In fact, the New York Post described Potdevin as a "[d]umpy man with [a] bulging stomach."

Granted, this is not exactly the kind of image a leader of a health and wellness company is supposed to project, but Potdevin brings real industry experience to the table. With that said, perhaps Potdevin could update his wardrobe with Lululemon's expanding line of men's clothing.

Lululemon is introducing its dedicated men's store space in Miami, Santa Monica, Calif., and Vancouver, with more cities likely to follow. The company believes that the new concept could generate $1 billion in revenue over the next few years from the $216 million in sales it saw in 2013 from men's sales. Lululemon is hoping to attract the "mindful" athlete by leveraging its more upscale brand reputation and stealing market share away from competitors.

Lululemon hosts cool events
When was the last time Nike hosted a yoga event in the field at the iconic Wrigley Field, home of the Chicago Cubs? The answer is it hasn't; but Lululemon did.

Lululemon has a unique approach to building brand identity that is specific to each region. Other notable events organized by Lululemon include a complimentary yoga class on the Andy Warhol Bridge in Pittsburgh and a half marathon in the city of Vancouver in which 10,015 people will participate. Events such as these are unparalleled and perhaps the strongest way of driving further brand awareness.


Lululemon's "Yoga & Yarn" event on the Andy Warhol Bridge
Source: Facebook

Bottom line
Analysts at Oppenheimer said on May 21 that Lululemon is on track to report first-quarter comps in line with guidance. Additionally, Oppenheimer believes that Lululemon will announce second-quarter guidance that is in line with the consensus estimate. Oppenheimer also stated that Lululemon remains the leader in its category and can leverage its reputation and brand when it continues its steady and carefully planned out expansion abroad.

Some analysts also favor Nike however for different reasons. Analysts at Macquarie upgraded shares to outperform from neutral in early April party due to valuation. The analyst noted that shares are trading at 23 times the 2014 earnings-per-share estimate of $3.20 compared to an historical average of 24 times.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.


Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica and Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information