Summary: ON SALE
Score: 15/20
MOS: 63%
Share Price: $339
Sticker Price: $931
Is Lululemon stock a good buy?
Lululemon is an athletic apparel retailer founded in 1998 and headquartered in Vancouver, Canada.
Lululemon sells athletic wear including tops, yoga pants, shorts, sweaters, jackets and undergarments, as well as hair accessories, bags, yoga mats and water bottles. Lululemon trademarked its original fabric, Luon, which included a higher-than-average amount of nylon microfiber, in 2005. Since then, the company has produced several different types of fabrics, including compression and moisture-wicking designs.
They currently have 491 stores in North America, Europe, and Asia but they generate over 50% of their revenue from online sales.
This article from Yahoo Finance talks about a recent dip in the share price despite strong holiday season sales and the recent purchase of MIRROR, an at-home digital fitness product. Don’t be alarmed as there is more good news than bad news ahead.
If you look at a recent chart of Lululemon, you can see that the share price has remained relatively flat since June but that could change on their next earnings reporting date on or around 3/24/2021.
Let’s first take a look at what others are saying before diving into the financials…
- This article from Yahoo Finance talks about how retailers have changed to meet consumer expectations on how to handle COVID-19. The article states that beauty and apparel brands outperformed other retail categories. The top performing brands included Maurices, Gap, Macy’s, and Lululemon.
- This article from Smarteranalyst.com states that Oppenheimer analyst Brian Nagal, a top 25 analyst with average returns of 37%, gives Lululemon a Strong Buy rating.
- This article from The Motley Fool says “Forget Zoom Video, Buy Lululemon in 2021.” Lululemon has delivered annual double-digit sales growth for five years. Lululemon not only serves the yoga or workout enthusiast, it’s also now work apparel as employees are hanging up their dresses, suits, and ties and opting for “comfy wear” as the work-from-home trend becomes more permanent. This is an added bonus for sales and should be reflected on the next quarterly/annual report.
Now let’s look at the numbers:
Revenue by Quarter (Found on the Income Statement)
Q1 2020 = $1.3B
Q2 2020 = $651M
Q3 2020 = $900M
Q4 2020 = $1.1B
Revenues are making a strong comeback since COVID-19.
Net Income by Quarter (Found on the Income Statement)
Q1 2020 = $298M
Q2 2020 = $28M
Q3 2020 = $86M
Q4 2020 = $143M
Net income is increasing. This is a good sign.
EPS by Quarter (Found on the Income Statement)
Q1 2020 = 2.28
Q2 2020 = .22
Q3 2020 = .74
Q4 2020 = 1.16
EPS is increasing. Another good sign.
Net Change in Cash (Found on the Cash Flow Statement)
Q1 2020 = $212M
Q2 2020 = -$270M
Q3 2020 = -$570M
Q4 2020 = -$611M
The Net Change is Cash decreasing.
Total Assets (Found on the Balance Sheet)
Q1 2020 = $3.6B
Q2 2020 = $3.4B
Q3 2020 = $3.2B
Q4 2020 = $3.2B
The Total Assets are increasing.
Total Liabilities (Found on the Balance Sheet)
Q1 2020 = $620M
Q2 2020 = $631M
Q3 2020 = $763M
Q4 2020 = $730M
The Total Liabilities are starting to decrease which is good.
Total Debt (Found on the Balance Sheet)
Q1 2020 = $0
Q2 2020 = $0
Q3 2020 = $0
Q4 2020 = $0
This is the most impressive part of their financial statement. $0 debt!
Total Equity (Found on the Balance Sheet)
Q1 2020 = $1.9B
Q2 2020 = $1.8B
Q3 2020 = $2B
Q4 2020 = $2.1B
The Total Equity is increasing.
With a score of 15/20, the income statement, cash flow statement, and balance sheet are very strong. When you look at the WHY page in Tykr, you can see the ROIC is 5/6, Equity Growth Rate is 3/3, the EPS Growth Rate is 3/3, and the Sales Growth Rate is 3/3. Although the cash is decreasing, the rest of the business is doing very well. I’m going to continue holding this stock in my TOP 10.
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