28 I just sold LULU for a -10.17% loss. I was so bullish on them, but they have lost what made them great. The issue that most of their clothes are actually not made in Canada, thus throwing potential buyers off, is bad in itself, but the lack of innovation is what is causing me to sell. I have been doing research all morning, looking into competitors and LULU’s growth model. I really like the management team, and they are trying to expand in a responsible manner, but they have to innovate while expanding. Let me outline a few points:
1. All they really do is change the colors available for their apparel, they don’t actually design new products, they just dye them differently. They are attempting to start a girls line of dance themed products, but that will be a serious niche market, as buying expensive clothes for still growing children doesn’t make a lot of sense. They are expanding internationally, but most of their competitors have already done so. Not offering their products through other retailers is seriously affecting their market saturation, where their competitors are happy to do so. @gapandyap loves their pants for men, but they have significantly changed their line, and don’t offer the same type of pants that gents can wear to work anymore. They need to release new products and find channels to get them to people.
2. They are being squeezed between the proverbial rock and a hard place. On one side you have companies like UA and NKE, that are making products very similar to LULU that you can buy at department stores, and on the other side you have companies like Lorna Jane and Zobha, that provide the same type of clothes and service, with more innovation. You also have companies like Unit-Y and Hard Tail that have been around, but are offered at Nordstrom, etc. This gives them easier access to ladies who are shopping for this type of apparel, but don’t have a specific brand loyalty. The new higher end brands, Lorna Jane and Zobha, are actually making new products, and improving upon existing ones. This leads me to my next point.
3. They seem to target only one type of body, this is not a good way to do things. Madame Rhino was looking for a proper sports bra in order to be able to run, almost all of LULU’s bras are for smaller chested women, thus not offering that much support. Then they have the “Ta Ta Tamer,” that apparently is big and horrible looking, but still does not provide the proper support. So, this evening after she gets home from work we are going to go up to Lorna Jane where she is going to buy one of their sports bras. Yes, this is based on her opinion, but judging from her conversation with her friend on Saturday, this seems to be the case overall.
Below are examples and websites
They have a whole page devoted to one hoodie in different colors here
Competitors offerings at Nordstrom here (lower price points too)
Lorna Jane here
Zobha here
I did preliminary research yesterday at Lorna Jane, and am going to follow up tonight.
When a stock is trading at such a high multiple, it needs the growth to match, and LULU just doesn’t have what it takes anymore.
28 Responses to “Dropping the Stretchy Pants $LULU”
UncleBuccs
Rhino – what a great post. Auntie has made the analogy of comparing LULU to COH. Coach is not prestigious any longer, and the quality has suffered over the years with the total offshoring of manufacturing.
I guess it’s still a tradable stock, but I do see headwinds & cracks developing…
On a side note – Stella McCartney’s line for Adidas always has a few winners in it, and I wind up blowing a few hundred each year on some new jacket for Auntie from her line. She always receives tons of positive feedback when wearing them…..
Rhino
Thanks dude, I am on it.
Kev
Solid post, great analysis. I always ask my female friends now about new brands or trends.. especially after missing the initial LULU pop and then finding they were all about the company 6 months before I had even heard of it (and before it btfo for 6 months).
UncleBuccs
OK, Auntie read through the post, and then shopped the damn Nordstrom link! LOL!
Her first comment while reading was “He does know his shit”.
Secondly she mentioned “Athleta” , owned by the Gap. She’s noticing more free-standing stores popping up & compares their product to that of “Lucy”. Auntie doesn’t care for the “fit” of either brand, but thinks Athleta is growing, and likes the way Lucy runs their stores & structures their ‘sales’.
Her next comment while reading was “I love what he says”…
She then went on to mention ‘Zella’ and said they are quality, and are doing everything right. She then pointed their line out to me on Nordstroms.
She said that Unit Y has a very good price-point, but that their fabrics are not “performance” and that the fit can be quite off & the tights/leggings are not supportive at all. She describes the brand as “Targety”. She pointed out that many of Unit Y garments received “3 star” reviews and that Zella has mainly 5 stars…on Nordstroms.
Auntie then mentioned “Hardtail” as doing some interesting things, but is unhappy that one can’t shop them directly online. Evidently that’s how you show up first to the gym in an outfit that no one else has…let alone has even seen. LOL!!
Besides LULU, her top preferences at the moment are:
Stella McCartney for Adidas – for innovation.
Nike – has really stepped up their game.
Under Armour – great materials, but really need a design team
That’s it!!
Once again, Rhino – really awesome post.
Rhino
The missus said the same about Lucy and Athelta, they are there, but she hates the fit. She said that Zella looked the best, besides Lorna and Zebah. She doesn’t like Hard Tail, she thinks it’s a brand for charlatans and the like– I have no idea why. Thanks for her input.
Sooz
great ideas above. Nike is still my fave when it comes to athletic wear.
UA is more football guy thing around this neck of the woods.
I’ve not seen Stella’s line and am unfamiliar with Lorna and Zebah.
Vickie Secret (LTD)has expanded their line as well. Gap has had a line for sometime now..
Mar 21 LULU to announce Q4 earnings Before Market (Unconfirmed)
Rhino, I’m positioned a bit differently then you as I was cost averaging up off shares Acquired 01/26/2011
I remain long
Sooz
If you take a step into the elementary~middle~high school(s) around here,on any given day,my guess would be that 30% 0f the girls are wearing something Lemon.
whether it be yoga pants, jackets, headbands..etc
(low~ball guesstimation)
Sooz
one last thought here..sorry
This trend has been strong for a few years now. By my observation (plus two teen girls) it’s name recognition has only accelerated. I mentioned here that they were opening a new store only 2 miles from the ‘Swanky’ mall in downtown ‘Richville’ (prime corner lot).
supply/demand
Sooz
in the meantime I may sell a bit of this hedge..
PROSHARES TRUST II ULTRA VIX SHRT TRM (POST REV SPLIT)
850.000 +35.16% $10.06
and roll those profits into LULU
watching closely
Sooz
shhh…
don’t tell the big guy over there but I just trying to get you to that 3%
now I’m off to visit Sir Raul and EM..
hope you all get to stay on the front page for much longer.
it’s been fun posting response.
Good luck to you ,Rhino..
always cheering!
Sooz
*I’m
Sooz
scooped up some shares of Vickie Secret instead:
Status Filled at $43.07
Symbol LTD
Description LIMITED BRANDS INC
Action Buy
Order Date 02/26/2013, 09:42:21 AM ET
(multi~tasking here today..umpteen other things going on)
Rhino
I like that company too.
Sooz
and I did sell a portion of
holding last in
Acquired 02/12/2013
+28.65% $9.86 (read at time of post)
Sooz
$12.68 +28.65% $9.86
Sooz
in regards to UVXY (above post)
sorry about that..sold off pretty good at close
Sooz
LTD to announce Q4 earnings After Market (Confirmed) Feb 27
Rhino
Nice, should be a pretty good tell as to the health of retail.
Sooz
I am hanging out with present and future hosiers today..it is lunchtime in Bloomington. This campus is gorgeous! Locked out of my acct..maybe my broker thinks my kid is trying to hack my acct..as I unmasterfully attempt to use her electronic device..technology..sheesh
Sooz
Have a great afternoon..all you beautiful peopleh
Sooz
Oop….scratch that ‘h’ there..
Sooz
intense past 29hrs..
road trip last evening was just bad..adding an extra 1.5 hr to trip..
Home sweet home now and just a follow up here.: I did manage to access acct after above post and this is what I did.
Status Filled at $46.43
Symbol LTD
Description LIMITED BRANDS INC
Action Sell
Order Date 02/28/2013, 01:01:41 PM ET
remain long smaller position @43.07
what happened to the green day?
some angry bears out there…
Rhino
Why’d you sell, lock in some profits?
Sooz
Rhino, I seriously had no intention of selling but was forced to do so given the market and all it’s uncertainty plus LTD’s gap up off earnings..
risk managing.
Sooz
it popped +8% within 2 days..
in this environment that’s good enough for me..
Sooz
*its
scratch that apostrophe..sheesh.
just in case the grammar police come after me..
Sooz
my profit (+7.80%..ish)
Sooz
^Mar 21 LULU to announce Q4 earnings Before Market
has been confirmed this am