Lu $LULU Let’s get together

The Foreplay…

Have you tried our new jeans yet?” was an all to common tag line as a past Abercrombie & Fitch employee taught to greet customers. Lululemon becomes no different, but has become a powerhouse in branding and producing margins. Lululemon even branded their employees with a customer centric and friendly title “Educators”, which part of their practice is to make sure customers are not only greeted, but offered unsolicited education about each product.

This is a company that has a cult following almost as great as Tesla’s cult following, once they reel you in, you keep coming back… and yes as a male I admittedly wear Lululemon now for working out and casual lounging. It’s proven to be very comfortable, especially the ABC (anti-ball crushing) clothing. This might be why the company wants to double its men’s sales by 2023; meaning revenues related will come close to $1 billion annually.

The rule was that “if a Guest was looking at a product for six seconds, an Educator had a thirteen-second window to educate them about the item. Barring any follow up questions, the Educator would then leave them alone until they looked at another item for around six seconds.” Wilson writes that this method would work because “our Educators [would] impress customers with their sheer knowledge of and enthusiasm for the item.” While it might sound like a shopping nightmare for some, it also might explain how Lululemon’s sales per square foot were in line with Apple and Tiffany & Co.

While in amidst of a global pandemic and most retail stores struggling to understand if their doors will close the next day, Lululemon has done the opposite. They are thriving with at home-fitness at all time highs.

Earnings

Fiscal Q2 reported; Direct-to-consumer revenue, increased 155% to $554.3m. Direct-to-consumer net revenue Q2 2020 61.4% v. 24.6% Q2 2019.

Lululemon has taken advantage of being stuck inside and gyms barley reopening if at all. Lululemon’s direct-to-consumer sales have pivoted from their operated stores because customers are either not wearing pants while working now or ditching jeans for yoga pants, shorts or sweats.

(NASDAQ: LULU) financial results for the third quarter fiscal 2020 will be released Thursday, December 10, 2020. The company will host a conference call at 4:30 p.m. Eastern time to discuss the financial results. A live webcast of the conference call will be available online at: HTTP://INVESTOR.LULULEMON.COM/EVENTS.CFM

$LULU third quarter fiscal 2020 will be released Thursday, December 10, 2020 at 4:30pm Eastern

Per Lululemon's 2020 Q2 Earnings Report, despite the continued pandemic they’re taking advantage of many retail locations from other companies closing. Lululemon is making sure to leave great impressions with their landlords by paying in full throughout the whole year. The CEO Calvin McDonald has referred to Lululemon as a “Growth retailer.” — The growth and expansion is needed as well by debuting stores with gym and café features throughout 2019 and hopefully expanding their Men’s department as well.

MIRROR

Image source: Lululemon Athletica

But wait… there's more (oh you remember THAT great company as well?).

Every great company learns to adapt once presented with a challenge such as the pandemic.

Lululemon has found an interesting opportunity toi move towards a subscription of reoccurring monthly revenue similar to Peloton Interactive($PTON).

Yes, an at home fitness company was bought for $500m in June 2020 by Lululemon, which gives us the new product “MIRROR”.

Instructors leading the live and on-demand classes (such as yoga) will continue to soar even after the pandemic has ended.

Let’s also not forget that Lululemon will be releasing their own footwear to rival Nike and Adidas.

Action…

Below is a $LULU chart on the 65m timeframe¹paying respect to Fibonacci.

Unfortunately it seems pretty over-extended and may be hard to gauge as the Fibonacci lines do not want this to fall further with the last retracement sitting at $374.37 — which currently is higher than the current price. I would of loved to see a pull back from the upcoming Q3 2020 earnings report, it would be a pullback caused from profit selling on the news. Long term this would be a good sign and a proper way for retail investors to possibly buy in on the dips.

$LULU 65m Chart with Fibonacci Retracements

I was not happy with the 65m Fibonacci Retracements so I applied another friendly timeframe; 195m. The below chart gives you a bit better of a view due to the much longer timeframe used. As you can see I would possibly be much more comfortable buying at the .5 retracement of $352.86 if it did pull back into that channel. I of course will follow my rule of how I buy and how much is bought. If this is an initial buy, in which it is; I will be buying a third of what I want to invest into and own either before the Earnings Report or after. If I do buy before the Earnings Report and it was above my desired retracement, I will wait for my retracement with hopefully the effects of the earnings report; a positive report with positive guidance with some investors selling on the news.

$PLTR 195m Chart with Fibonacci Retracements

Simple Moving Average (20-Day) $350.21
Simple Moving Average (50-Day) $341.40
Simple Moving Average (200-Day) $293.15

Total Cash $522,998,000
EBITDA $761,664,000
Current Liabilities (MRQ) $763,309,000
Total Assets (MRQ) $3,494,027,000

Market Cap $48.45B
Revenue Per Employee $246,403
Put Call Ratio 0.7212
Institutional Ownership 89.40%

52 Week High $398.29 [09/02/2020]
52 Week Low $138.98 [03/16/2020]

2:1 split on the 12th of July 2011

Filed transaction by Lululemon Athletica Inc director. Grant, award or other acquisition pursuant to Rule 16b-3(d):

Acquisition by Gibson Kourtney of 218 shares of Lululemon Athletica subject to Rule 16b-3

Lululemon insider trading alert for grant of common stock by Gibson Kourtney, the corporate stakeholder, on 25th of November 2020. This event was filed by Lululemon Athletica Inc with SEC on 2020–11–25. Statement of changes in beneficial ownership — SEC Form 4

TLDR; I’m bullish on $LULU, Lululemon is a lifestyle brand and developing itself further to become a lifestyle fitness brand with a very bright future. This is a company I would want to own and invest into for a very long time and anticipate another stock split if the price keeps traveling North.

Although I do anticipate a pull back due to all time highs and a upcoming positive Q3 earnings report. The pullback should create a great temporary entry if timed correctly and if my plan is followed.

If for some reason this does not pull back to the $352 — $358 range leading up to the earnings report, I will pay close attention to the price action, volume, and Put Call Ratio as we approach December 10th for a better understanding.

References

https://investor.lululemon.com/static-files/00125b7e-e43b-47ed-bea0-8f752a1a09b5

https://www.bloomberg.com/news/articles/2020-09-17/lululemon-s-mirror-workout-tool-doesn-t-sell-sports-bras-yet

  • 1. If we had used a 60 minute chart, it presents a flaw, this would give us a trading session without equal intervals, since 390 minutes is not divisible by 60 minutes — when divided it gives you 6.5 intervals. This is why in our interval we ignore the first 30 minutes of trading in our charts — with the result of 65m timeframe being used.
  • If you’ve made it this far, then you will understand the title perhaps is a South Park reference to Butters singing “Lu lu lu, I’ve got some apples.” (It Sneezes Milk Season 9 E 7 • 04/20/2005)

Disclaimer: This article is for informational purposes only. It should not be considered as financial advice. Please consult a financial advisor prior to making any investment decision.

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Frank

Frank

Information provided in this poorly written blog shouldn’t be considered as a recommendation or financial advice, but only opinion. Few links may be affiliated.