1 Dead Retail Stock in Need of a Grave

Market Foolery tosses dirt on the grave of one retail company, while they see a possible turnaround for another.

Jun 24, 2014 at 12:04PM

On Monday's MarketFoolery, host Chris Hill, Motley Fool One analyst Jason Moser, and Stock Advisor Canada analyst Taylor Muckerman talk about desperate retail founders.

Dov Charney, founder of American Apparel (NYSEMKT:APP), has promised to sue his company after they ousted him. Jason quips that a lawsuit is just what the failing company needs right now and Chris explains the company has lost more than $250 million in the last four years and has $200 million in debt, with some of that debt at a 20% interest rate.

lululemon athletica (NASDAQ:LULU), similarly, is trading at its lowest point in the last three years, and its biggest problem may be founder Chip Wilson, who is teaming up with Goldman Sachs (NYSE:GS) to get his company back. Chris wonders if the company could turn around if Wilson wasn't a distraction. Taylor didn't like Lululemon when Wilson was at the helm, yet he's still not a fan of it. From there, Chris moves the conversation to founder-led companies. Jason adds that "founder-led" is not an investing thesis. At the end of the day, he notes, it just doesn't matter, because if a company is rotten, it doesn't matter who's running it. 

Jason doesn't think that American Apparel can turn around, but he does think that Lululemon can because of the amount of customer loyalty and brand development. Yet Jason and Taylor agree the company will need to move beyond the fad of yoga. Taylor explains that companies like Nike (NYSE:NKE) and Adidas (NASDAQOTH:ADDYY) have sponsored all types of physical activities, which helps the companies have a lasting impact.

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Chris Hill has no position in any stocks mentioned. Jason Moser owns shares of Nike. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs, 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.

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