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Things I could buy with LULU's market cap

LULU, a yoga and running apparel company for rich yuppies that sells 60 dollar tshirts and running shorts, apparently inspired by India, where people do yoga in normal clothes that cost a lot less than 60 dollars for a tshirt.  Currently worth 12 billion dollars as of today.  With a P/E of 66 and clearly decent management.   Here’s some more companies worth about 12 billion dollars:

The Gap Inc. (which owns The Gap, Banana Republic, Old Navy etc)

Ameriprise Financial

Chesapeke Energy

Cigna

Canadian Pacific Railway Limited (USA)

Harley Davidson

Dollar Tree

Discovery Communications INC

Ingersoll Rand

Starwood Hotels

Marriot Hotels

Monster Beverage

Nokia

Nucor Corporation

Kohls Corp

Juniper Networks

Invesco LTD

Mattel

Red Hat

Seagate

Sherwin Williams

St. Jude Medical

Rockwell Automation

Stanely Black & Decker

Talisman Energy

Sara Lee

McGraw-Hill

The Western Union

Wynn Resorts

Zimmer Holdings

LNKD

23% of Nike

CROX nearly seven times over

GMCR nearly three times over




No Homo

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Lulu is very popular among HCB.  I should have looked into it when my ex and her hot friends were all buying it a few years ago to work out.

Inducted into the AF Hall of Fame, class of ‘17

Indeed.  I might use this as an excuse to take up yoga. 

No Homo

Yoga is pretty cool.  I’m surprised at how much I like it.

You want a quote?  Haven’t I written enough already???

Sounds like a set up for an awkward boner scenario. 

“Visit the Water Cooler forum on Analyst Forum. It is the best forum.”
- Everyone

No way, let that boner hang out of your tiny little LuLu yoga shorts.  It’s Yoga.  It’s all about that stuff.  You know natural. Just like India. 

No Homo

Tikka, is 12B the equity capitalization, or is it TEV?

I don’t find it all that useful to compare the sizes of companies by market cap, since the level of financial leverage can distort a lot of things.  I find TEV to be a better comparison metric for finding similarly sized companies.

It is true that PE is somewhat insensitive to D/E ratios, but then it’s not really all that necessary to use market cap to make comparisons, except perhaps to the extent that market cap affects liquidity.

You want a quote?  Haven’t I written enough already???

F*ck, I’ve got no idea.  You’re the charterholder :-)

LULU has no debt currently. 

No Homo

No need to get testy ( though I did see your smiley ), I was just curious what you were thinking.

So 12B is an approximation of TEV for LULU.

You want a quote?  Haven’t I written enough already???

It’s the market cap according to google finance.  I’m a lay person. 

TEV = Market Capitalization + Interest Bearing Debt + Preferred Stock - Excess Cash.

LULU  TEV = 11.57 B + 0 + 0 - .409 B = 11 B Approx

No Homo

good point bchad…..

Ok, I’m short this f*cker now.  I hope it keeps going up.   I haven’t gotten my spurious signal from god yet to sell this thing yet. Although the CFO did sell 30k shares yesterday.  So, maybe that means something.  I can understand it.  I’d want to book some of these profits too if I were him.

I’ve decided to buy lots of deep OTM puts expiring shortly after earnings calls for example June 16th with strike prices of 50, 55, and 60.  I’m buying these by the hundreds.  I’m also holding a dozen or so longdated puts.

I figure if this stock has poor guidance anytime soon it could do a GMCR.  Don’t get me wrong, this is a great company.  It will still be a great company with a market cap of half of what it is today. 

I’m gonna keep doing this until either I’m convinced that this is the next coming of Nike or the market agrees with me.

Seeing as I have no real skill at this, I sure as hell hope I get lucky and quickly. 

No Homo

Well, LULU is down 7.5 percent. 

Please GOD let this trend continue.  I will take all of Analystforum to the champagne room if my options expire in the money. 

The active portion of my portfolio is up 25 percent today. 

No Homo

ChickenTikka wrote:

Well, LULU is down 7.5 percent. 

Please GOD let this trend continue.  I will take all of Analystforum to the champagne room if my options expire in the money. 

The active portion of my portfolio is up 25 percent today. 

Whitney Tilson is short LULU as well - he mentioned it at the Value Investing Congress I was at a few months back.  His reasons are partially explained here.  Best of luck with your trade, Tikka - and I will hold you to the champagne room promise.

I grew up in the city where Lulu Lemon was founded, yoga is so popular here that it bisects all races, classes and genders.  That is more testiment to the uniqueness of Vancouver being an asian city on coast of north america populated largely by hippies and health concious drug dealers.  Then a testiment to the ancient activity of Yoga.

Additionally, the leadership of LULU talks up the popularity of yoga as part of their growth story. Essentially they are riding a trend, much like Nike did with jogging, that will allow them to capture significant maret share in the athletic apparal market. With an aging demographic in North America I can see continued growth in yoga as a fitness activity but not anything anywhere near a level that would support these valuations.

BTW while they make great pants that make shorty’s bootys look fantastic they also make some really comfortable mositure wicking hoodys.

**** Tilson is in on this?  Hmmm, maybe I should go long. That guy is wrong about everything.  jc penny the next apple? Well sure, just minus the iPods, iPhones, and iPads, which in effect makes it a defunct aging relic of a computer company.  I’m not sure how he could love GMCR and not like LuLu.  Lulu is a much better company than GMCR ever was.

I havent managed to find a single bad word about Lulu and I get that they, being Canadian, are in a sweet spot in Vancouver.  Still, Canadian brands just dont work in the US.  Roots never caught on.  Tim Hortons will never be Starbucks.  The only exported brands that work from Canada are comedians,mane that is just because we don’t realize that they are Canadian.  

if this company were truly smart they would move their headquarters tombeverly hills or San francisco and get kardashians giant ass in one of these stretch pants.  They should also double the price. 

What I have learned about women is that they want what their friends want but don’t have. They will spend every cent on that.  This is the most bullish thing I can say about LuLu.  

So far this short is working very well.  This company has been down just about everyday since I put the trade on. Evne more so than the market.  I was hoping that this thing would bubble and pop but for now it’s been a much more sensible slow retreat.   June and September puts are up 120 percent.  Market cap is just above 10 billion.  



No Homo

bodhisattva wrote:

Additionally, the leadership of LULU talks up the popularity of yoga as part of their growth story. Essentially they are riding a trend, much like Nike did with jogging, that will allow them to capture significant maret share in the athletic apparal market. With an aging demographic in North America I can see continued growth in yoga as a fitness activity but not anything anywhere near a level that would support these valuations.

That is actually a really interesting take on multiple levels….something worth munching on.

It’s also possible that they could be a buyout target for another rising sportswear brand - UA…..

Hmm….this is in a way smelling similar to Hansen Natural.

A buyout?  At this market cap and valuation?

Really, who could afford to write a check for 11 billion dollars + whatever the takeover premium would be? 

Certainly not The GAP who has a similar cap.

Nike? Maybe possible, but incredibly difficult.  Is there any historical precedent for this?  Wouldn’t it be easier for them just to use their own brand and enter this space?

This is the main reason that I don’t screen for shorts that have market caps below 5 billion. There is just a much greater chance that someone could come along and instagram them by overpaying by 2 to 3 times.  When GMCR had it’s highest valuation well north of 10 billion, I could be reasonably certain that nobody was gonna buy them out.  GMCR was almost 2/3’s the valuation of SBUX at the time.  LULU is basically bigger than all of its peers and could only be bought out by someone like NIKE and that just aint gonna happen at these multiples when they are roughly 25 percent of Nike’s total cap.

With respect to Bodhi’s idea, that does seem very true.  Yoga is on the up and up and has been for some time.  However, this assumption that LULU is somehow going to grow into shoes, clothes, hats, golf clubs, tennis, god knows what, the way Nike did is a huge assumption one that I would discount at something like 98 percent which does not explain their valuation.

Right now their business model is to sell very expensive tight clothes to affluent people.  This is a great business, but one that can’t really grow past a certain point where you have saturated this small group of affluent people willing to overpay like this.  It’s also subject to being very faddy.

I seem to remember a time in college when every little rich girl I knew had the words “Juicy” written accross their asses. 

In terms of expansion.  NO ****ING WAY! 

1.  The US - they’ve already grown pretty as fast and hard as they could.  Every high maintenance chick on the East and West coast is already in. 

2.  Europe - Nope.  The sky is falling there.  Not to say they can’t pull it off, I bet they don’t even try.  Really, when was the last time you heard a CEO on CNBC saying, “Yep, we’re spending a fortune trying to rampup sales in Europe.  We really see it as the go to economy for sales growth in 2013.”  Yep, they’re gonna love paying for that strong canadian dollar when the euro is at .70.

That leaves my favorite:

3. Asia:  Asians like to be conspicuous with their wealth.  The last thing any Asian wants is to overpay for something that doesn’t shout, “Look at me I’m rich, *****.”  This works well for austentatious brands like: Aston Martin, Rolls Royce, Luis Vuitton etc.  Not as well for less showy but more granola-y brands things like Volvo or the Toyota Prius.   Besides, Indians have yoga clothes that they have been wearing for 5000 years.  Don’t think they need Canada’s improvement.  The moment I hear that LULU is going to dive in headspeed into Asia I’ll know my thesis is right.

The only way for LULU to defend this valuation is to do what apple did.  This is to start out with a small but incredibly loyal fanbase and come up with a product that is super cool and desirable by the entire world that cannot be easily imitated.  Could they do this? Maybe.  Big maybe.

This thing gets cut in half the moment there starts to be any doubt about their growth prospects.  That happens by 2014 at the latest based on forward earnings predictions.  They can probably meet this years earnings guidance but 2014 and 2015 look damn near impossible, especially in light of a recession. 

The only way that LULU makes those earnings is if they invent a pair of stretch pants that allows women to eat as much as they want and not gain any weight.


No Homo

See it’s not just about selling it to high maintenance yuppie girls. Potentially their market could include really ALL women and most Men as well. Most men and women in the US don’t do yoga, sure, but what I’m focusing on is whether Lulu can create a “need” when no such need existed prior. Think of how nobody brushed their teeth until P&G started convincing people to do so.

As it stands now, sure Lulu is overvalued, goes without saying, but is it just a passing fad? Not convinced.

Yeah, I get that.  Good point.  We had this in India.  When I got here 6 years ago they didn’t really sell underarm deoderant. 

Now suddenly they are even selling “fairness cream that fights sweat.”

No Homo

perhaps its not a fad and here to stay, but valuation is still too high….their FCF yield is close to 100X….they only way to get the growth justified is through China and other emerging markets…..perhaps they can do it….but not putting money on that happening…..

Agree, this, much like AAPL, was a buy in 2007.

you basically need to come from a target school pedigree/work at prestigious firm in the US/have a really good connection.

- AF hivemind

Earnings is coming up.  I’m loading up on Puts and Calls.  I’ll be skewed towards the puts of course, but I do expect they will most likely guide upwards. 

No Homo

9 percent drop yesterday.  Word up *****es!  That’s 20 percent drop since I started shorting. 

No Homo

almost made up for you 30% lost on facebook….

My conditional offer on FB shares was 28 $ and was not filled so no loss whatsoever there.  In fact I made money being short Zynga and LNKD. 

No Homo

So Tikka is the one manipulating LULU stock lately? That SOB


Ok folks.  It’s at 57 dollars a share now, down from 80 where I bought puts on it for september.  Thank you Jesus!  200 percent return on the puts. 

No Homo

How are you feeling about this trade?  Going to stay in until September?

Well I shorted it at above 75 so I feel pretty about about it.  My put options are way up as well.  I could call it a day but I think this thing could drop quite a bit more. 

No Homo