LuLulemon Athletica Created By: Amanda Brunssen, Chris Fleischmann, Sam Heston, Sean Lewis & Haley Muir.

LuLulemon AthleticaCreated By: Amanda Brunssen, Chris

Fleischmann, Sam Heston, Sean Lewis & Haley Muir

Industry & Description Company Background Annual Earnings, Quarterly Earnings, Stock Performance Economic Overview SWOT Industry Outlook Competitors Leader Price Estimates & Financial Statement Analysis Shareholder Questions Top Three Reasons to buy this stock

Overview

Industry: Textile- Apparel Clothing Distributes athletic apparel for women, men and

female youth increased athletics among women Apparel includes fitness pants, shorts, tops, and

jackets for healthy lifestyle activities, such as yoga, running and general fitness

Accessories include bags, socks, underwear, yoga mats, instructional yoga DVDs, and water bottles

47 stores in Canada, 108 in the US, 18 in Australia and 1 in New Zealand

Industry & Description

Key managers CEO- Christine Day CFO- John Currie Executive Vice President, Retail Operations North America- Delaney

Schweitzer Executive Vice President, Chief Product Officer- Sheree Waterson Chairman of the BOD- Dennis Wilson

Competitive Advantage No long-term debt Loyal customers High-quality products Strong/popular industry Fast-growing company brings more popularity

How long have they been around? Founded: 1998 in Vancouver, Canada IPO= 2007

Company Background

What is their market cap? 10,920,000,000

How has the stock performed? Increased by 26% last quarter

Vs. 4-5% by competitors Any splits coming up?

2 for 1 on 7/11 Nothing currently scheduled

Any dividends? N/A

Company Background Cont.

Annual Earnings

Quarterly Earnings

Stock Performance

GDP: Growth of 2.3 % in 2012 Unemployment: Around 8% by ‘13 Interest rates: little or no increase Inflation: 2% in ‘12 Retail sales: 6% growth in ‘12

Economic Overview

SWOT

Strengths High quality products and a

successful connection with the yoga/fitness community

Higher quality= higher prices= more money

Considered the ‘unofficial sponsor’ of yoga

Yoga class provided by Lululemon shows customers that it fully believes in using yoga as a form of physical activity

Brand loyalty

Weaknesses Not enough stores for

personal selling Limited store locations

means more customers have to order online, and aren’t able to fully experience the Lululemon experience.

Not diversified

SWOT Cont.

Opportunities

Innovation For example, expansion on men’s line

Expand internationally

Threats

May lose customers to competitors when the economy is down due to high prices

Spending on yoga currently around 6 billion dollars Yoga Journal

Niche Good quality Brand name Loyal customers

Industry Outlook

Nike comparing to Lulu with rates Nikes market is saturated

Others: Under Armour

Doesn’t reach out to the yoga market Doesn’t reach out to women

Women buy more

Competitors

The company has run off nine straight quarters of double-digit sales and earnings growth

It passed $1 billion in annual revenue last year, up from $453 million only two years earlier

Loyal customers

Why Lululemon is the Leader!

Mean target: 79.63 Median target: 83 High target: 100 Low target: 46 Number of brokers: 16

Price Estimates

Financial RatiosLiquidity Ratios

Lululemon Athletica Nike

2011 2010 2009 2011 2010 2009

Current Ratio 4.56 3.69 2.58 2.85 3.26 2.97

Quick Ratio 3.89 2.94 1.43 2.17 2.65 2.25

Industry

3.2

2.1

Asset Management Ratios

Lululemon Athletic NikeIndustry

2011 2010 2009 2011 2010 2009

Inventory Turnover 12.38 10.28 6.79 7.68 9.32 8.14 4.2

DSO 4.68 6.64 4.16 54.9 50.87 54.89 (NA)

Fixed Asset Turnover 8.58 5.72 4.23 6.93 6.78 6.72 (NA)

Total Asset Turnover 1.43 1.47 1.67 1.39 1.32 1.45 1.3

Financial Ratios (continued)Debt Ratios

Lululemon Athletic NikeIndustry

2011 2010 2009 2011 2010 2009Debt Ratio 21.81% 24.13% 26.83% 34.37% 32.35% 34.39% 38.00%

Profitability Ratios

Lululemon Athletic NikeIndustry

2011 2010 2009 2011 2010 2009

Operating Margin 25.60% 19.19% 17.25% 13.49% 13.08% 13.05% (NA)

Profit Margin 17.12% 12.87% 11.13% 10.22% 10.03% 7.75% 9.21%Basic Earnings

Power 36.48% 28.29% 28.81% 18.76% 17.25% 18.89% (NA)

ROA 24.40% 18.97% 18.60% 14.22% 13.22% 11.22% 12.60%

ROE 31.21% 25.00% 25.42% 21.67% 19.55% 17.10% 18.98%

Market Ratios Lululemon Athletic Nike

Industry2011 2010 2009 2011 2010 2009

Price/Earnings 79.78 68.88 21.42 19.24 18.75 14.44 27Market/Book 16.37 6.74 1.58 3.8 3.26 2.57 5.43

Analysis of RatiosCurrent Ratio – Helps determine how much is available in cash or near cash items to meet

current obligations

Quick Ratio – Can the firm meet it’s short term obligations relying on only near cash

assets

Liquidity RatiosLululemon Athletic Nike

Industry2011 2010 2009 2011 2010 2009

Current Ratio 4.56 3.69 2.58 2.85 3.26 2.97 3.2Quick Ratio 3.89 2.94 1.43 2.17 2.65 2.25 2.1

Analysis of Ratios (continued)

Are we generating an adequate return based on sales and total investment?

Profitability Ratios

Lululemon Athletic NikeIndustry

2011 2010 2009 2011 2010 2009

Profit Margin 17.12% 12.87% 11.13% 10.22% 10.03% 7.75% 9.21%

ROA 24.40% 18.97% 18.60% 14.22% 13.22% 11.22% 12.60%

ROE 31.21% 25.00% 25.42% 21.67% 19.55% 17.10% 18.98%

Analysis of Ratios (continued)

Helps assess the firms performance relating our fundamental goal of stock price maximization to internal numbers effected by managerial decisions.

Market Ratios

Lululemon Athletic NikeIndustry

2011 2010 2009 2011 2010 2009

Price/Earnings 79.78 68.88 21.42 19.24 18.75 14.44 27

Market/Book 16.37 6.74 1.58 3.8 3.26 2.57 5.43

Questions for Shareholder

How long do you expect to maintain a 30% yearly sales increase?

What are your international expansion plans? From your experiences, does Lulu perform well during

economic downtime? How can you compete with other companies who price

their yoga pants at lower prices? Do you think some people deter away from Lulu, because of your higher prices?

What are some new products coming out? At 58.5 and 10.7 P/E and Price/sales, respectively lulu

is considerably high compared to the industry at 25 P/E and 3.0 price/sales. What steps is Lulu taking to bring in more sales and earn more to lower these ratios?

Fast-growing stock 26% last quarter

No long-term debt Bright future spending in the retail market

is increasing yoga market is currently at 6 billion

Recommendation buy, and hold

Top Three Reasons to Buy this Stock

http://www.kiplinger.com/businessresource/economic_outlook/

Lulu Annual Report http://shop.lululemon.com/home.jsp http://investing.money.msn.com/

investments/key-ratios?symbol=lulu&page=FinancialCondition

Sources