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Company name Lululemon Athletica inc.
Stock ticker LULU
Live stock price [stckqut]LULU[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Poor
Sales growth Good
EPS growth Good
P/E growth Poor
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $96.53
Target stock price (averages with growth) $99.86
Target stock price (averages with no growth) $46.54
Target stock price (manual assumptions) $90.63

The following company description is from Google Finance: http://www.google.com/finance?q=lulu

lululemon athletica inc. is a designer and retailer of technical athletic apparel. The Company offers a line of apparel and accessories for women, men and female youth. Its apparel assortment includes items, such as pants, shorts, tops and jackets designed for healthy lifestyle activities and athletic pursuits, such as yoga, running, general fitness and dance-inspired apparel for female youth. The Company conducts its business through two channels: corporate-owned stores and direct to consumer. The Company markets its athletic apparel under the lululemon athletica and ivivva athletica brand names. As of February 1, 2015, the Company’s retail footprint included 211 stores in the United States, 57 stores in Canada, 26 stores in Australia, five in New Zealand, two in the United Kingdom and one in Singapore. The Company’s retail stores are located primarily on street locations, in lifestyle centers and in malls.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in Lululemon Athletica inc. as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of Lululemon Athletica inc. calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
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In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

  • Stock price at the time of the calculation: $66.51
  • Growth: 0.17
  • Current EPS (TTM): $1.87
  • P/E: 35.6
  • Future EPS Calc: $4.09
  • Future Stock Price Calc: $145.95
  • Target stock price: $90.62

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I hope that this makes you a Confident Investor.

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In the first quarter, Buffalo Wild Wings [stckqut]BWLD[/stckqut] reported a 19.8% increase in sales. Both new store and existing stores sales were quite strong. Same-store-sales at company-owned restaurants were up 7% while franchised restaurants grew by 6%.

While sales were up nearly 20% however, earnings were only up 2.6%. Operating margins were down by 170 basis points to 9.9%. Labor costs rose by 100 basis points to 29.6% of total sales. Cost of sales meanwhile rose by 200 basis points points to 28.5% sales, driven by a 40% increase in chicken wing prices following strong demand. Wing prices for the company were $1.92/lb versus $1.36/lb a year ago.

However, there is reason to believe that margins will return. Management reaffirmed its EPS growth guidance for the year of 18%. One could argue that management had already accounted for the impact of chicken prices given their previous estimates typically targeted around 24% growth.

Additionally, BWLD struggled to manage its labor costs as they staffed all locations with Guest Experience Captains. If this proves to improve sales enough to warrant the cost, the company can reasonably expect to keep it. If it is still a cost drag, it wouldn’t be too difficult to scale back down to historical levels.

… and later in the article…

While margin pressures are a primary factory to the current weak share price, these headwinds look temporary, or at least fixable. Now trading at a valuation not seen for some time, investors would be wise to consider BWLD for their portfolio.

Source: Buffalo Wild Wings Still a Great Value – GuruFocus.com

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Under Armour [stckqut]UA[/stckqut] has performed exceptionally well in the last five years. Its revenue growth trend has been remarkable with last twenty quarters posting growth of at least 20%. Lately, the company has also shown good performance in international markets with revenue crossing $100 million for the first time in the recently concluded quarter. And more importantly, for a fast-growing company, its debt is at reasonable levels.

Nonetheless, shares have been under some pressure following the fiscal first-quarter results. UA parred some earlier gains following the quarterly results as it EPS declined 16.7%, year-over-year, mainly due to unfavorable foreign exchange environment and costs related to recent fitness based app acquisitions.

The stock now trades $7 below its 52-week high. But in my opinion the stock has potential to scale higher. I see further 10% to 15% upside in the mid-term.

Source: Under Armour Is Gaining Traction In The Sneaker Market