Getting More Bearish on LULU

758 views

LULU reported earnings today, I am doing my initial work on their reports. I don’t like what I see so far, but I really want to read some sell-side work on the subject before I make my decision to add to my short or buy some puts. I’d love to buy some weeklies first thing in the morning, and make an easy 50%, but it’s not that easy if the conviction isn’t there. It’s not that I am lazy and stupid that I want to wait for an updated sell-side report, it’s because sell-side folks often raise interesting points, from within their crystal balls. Here are some of my notes so far.

  • Too easy to copy. UA and others have almost the same exact pant at a lower price point.
  • There is just too much competition in the sector, at the same– and other –price points.
  • Global expansion is too late, and saying that they will “partner” with others in other countries seems sketchy to me. They are already having quality control problems, and they don’t even have their merchandise in any department stores, or partner stores.
  • The demand is gone. Lady Rhino is over them, she says that they just have much of the same clothes in different colors. Already having two of everything she likes, why get more? Lorna Jane has recently wowed her with their diversity and functionality of products, especially sports bras for little girls with not so little, that also look “cute.”
  • High school girls in “Mid-America,” don’t have the spending money to afford much LULU, but they do have the money to buy UA, Gap Body, LTD’s VSX and PINK, and Target’s C9 active apparel. C9 is opening up their own individual stores in LULU’s territories, currently.
  • There’s not enough growth for the current multiple, and what happens when the yoga bubble bursts? When “yoga apparel” becomes just “active apparel,” their high price point and high trading multiple are going to kick the stock price down the stairs.

This is just speculation at the current time, as I have to so more work. But I didn’t want you to think that I was ignoring the earnings beat today.

7 Responses to “Getting More Bearish on LULU”

  1. Fantastic call! Rhino! Congrat!

  2. here’s a somewhat comparable example (?) then again maybe it’s just apples/oranges:
    😉
    This trade was posted(via pickr)
    back on 10/25/2012
    I scooped shares of Decker in AH after they posted earnings(another hated stock)

    article from archives:

    The company reported a better than expected Q3 at $1.18 per share versus consensus of $1.04. However the company guided Q4 EPS down 14% versus prior guidance of a gain of 22%. The stock last traded at $29.70. Support below is at $28.86. Resistance is at $30.48.

    the stock price 5 months nearly to date and at time of this post sits (+69.76%) off the lows.

    I will sell the remainder of my position here:
    purchased^ @ 29.25(+72.14%)

    Status Filled at $50.3501
    Symbol DECK
    Description DECKERS OUTDOOR
    Order Date 03/26/2013, 02:47:34 PM ET

  3. edit:
    sh!t..!
    scratch should read (+74.46%) off those lows

  4. all the Da Bears(scathing articles) were certain that DECK would never sell another pair of their 21st century fleece lined moon boots again..

    hmmm?

  5. […] Stock Ideas Do Not Exist in a Vacuum -People are quick to say how you can make money investing by paying attention to local businesses around you. But Rhino is one of those rare traders who actually does translate these observations into profitable stock picks. His recent bearish position on $LULU is only one of many “finger on the pulse” stock ideas. This is an area I’m trying to learn the most from him, given the ripe opportunity for investment income to be generated. […]

  6. I believe other sorts of web page owners should probably take into consideration this site as an example. Seriously clean and user friendly approach, and in many cases first-rate content! You are experienced with regard to this issue 🙂

Comments are closed.
Previous Posts by Rhino