Yes ladies, Lululemon has a hot new product out, it's called the Lululemon IPO (initial public offering) which means their company is now selling stock to the public. This means you can buy a piece of the company.
A few years ago, I was introduced to a brand of clothing known as Lululemon. Being completely inept in fashion, I had no idea what it was. I learned about them from a conversation with a friend. It went something like this:
Friend: Hey Chan, check out my special new pants. Pretty sweet eh?
Chan: Uh.... sure. What makes them so special?
Friend: They're Lululemon pants!
Chan: Uhhh... okay, how much were they?
Friend: $100
Chan: $100 !!!! Why are those pants so expensive?
Friend: Because they're special Yoga pants, and they're super comfortable.
After this conversation, I started noticing a lot of women wearing Lululemon products. Any of my friends who had owned them seemed to have this deep attachment with the brand name. I thought to myself, this is crazy, but I'd sure love to invest in a clothing company who has a cult like following.
The next anecdotal evidence that I got about how popular Lululemon was getting was from one of the Kid's Ministries that I volunteer for. A product is usually popular if all of the kids have them. For example, those Crox shoes are insanely popular with the kids. Consequently, if you bought some
Crox shares a year ago, you would be up 450% in your investment.
Anyway, I saw this 10 year old girl who was decked out in Lululemon gear: pants, handbag, shirt, hoody, shades, and headband. Actual retail price for the whole outfit, $500+. I thought to myself, this is absolutely ridiculous, buying your kid so many expensive clothes since she's going to grow out of them so fast!
On Friday, Lululemon issued its IPO (initially public offering) of stock, and became a publicly traded company in Canada (stock symbol
LLL) and the US (stock symbol
LULU). The stock skyrocketed on its first day, moving from $18 USD to $28 USD, which is a 55% gain in one day. The Globe & Mail has a more
indepth article about Lululemon. Essentially the case for buying Lululemon's stock is that they're still a very young retail company with a proprietary athletic product being sold in very few stores in the US, so they're looking to aggressively grow in that market. This is definitely a growth story.
What makes Lululemon products a proprietary product? The Financial Post has an
article about it.
"Lululemon is at a tipping point of American expansion and I think there is a need for a further capital infusion," said Luke Sklar, founder of Toronto-based market research firm Sklar Wilton & Associates.
"They are on the short list of great Canadian retail success stories. They deserve to be very successful. I think they do a fantastic job rooted in high-quality product with a great look. Luon (a proprietary stretch fabric developed by the retailer and contained in most of its athletic clothing) holds up, and women are convinced that it makes their butts look better."
With estimated 2006 revenue of more than $100-million, Lululemon has reportedly doubled earnings and revenue for the past five years. It has 35 stores in Canada and has been rapidly expanding in the United States, where it has 25 outlets in 11 states. It also has a handful of stores in Australia and Japan.
Shortly after selling part of the business, Mr. Wilson, who before opening Lululemon in 1998 had founded and later sold a successful surf and snowboard apparel chain, Westbeach, told the National Post he had visions of building Lululemon into one of the world's biggest athletic brands.
But despite stellar sales, he had difficulty trying to secure space in high-quality U.S. retail malls in 2005. "When we wanted real estate in the U.S. as a Lululemon, we couldn't get it no matter how profitable we are. To do it, we needed some sort of financial muscle and name recognition." U.S. partners such as Mr. Meers had those connections, he said.
If you're even contemplating buying some of this stock, I would suggest waiting a few days for the initial hype to die down. A lot of people got burned on the Tim Horton's IPO because everyone jumped on the bandwagon, and the stock dropped a few days later and never recovered. Make sure you do your research, and consider your financial situation before investing. This article does not constitute financial advice, and I am not responsible for any gains or losses that you may incur.
Interesting that they decided to outsource their manufacturing to China. They used to brag about how their stuff was made in Canada. In addition, if they're trying to market a high-end high-quality product, you'd think they'd keep production in Canada. But, I guess it all comes down to profits.
Anyway, I haven't had a chance to look over Lululemon's financials yet, so I can't definitively say whether it's a buy or a sell yet. However, there is one trend that will work for Lulu. Usually retailers' stock will ramp up in the last part of the year because they have Thanksgiving sales (biggest shopping day in the states) Christmas sales and that sort of thing. So, it's typical for investors to buy retailer stock in late August or early September. It's all part of the investment cycle.