Lululemon Doubled Revenues And Men'S Clothing Became "A Magic Weapon".

Lululemon achieved more than 20% of its revenue growth in 2018, and developed a stronger 5 year vision of revenue and earnings growth.

Lululemon plans to enter new markets including footwear.

It is believed that in 5 years, the income of men's clothing can be doubled, and international income can also be doubled four times.

At the current price, we seem to be paying the price for growth, though the free cash flow is impressive.

Lululemon Athletica (LULU.US) recently announced the best year for revenue growth since 2012.

Last month, the new CEO Calvin McDonald put forward an ambitious 5 year growth strategy, including entering the new product market, raising the international revenue by 3 times and doubling the revenue of men's clothing.

The market responded positively to the company's performance.

The stock rose 53% in 2018 and 45% again this year.

Although the company can be said to have not been underestimated, in the light of its bold vision for the next five years, I expect that the company will continue to perform well.

If the economy turns downward, or its ambitious new expansion plans fail to work, these unknown factors will have any impact on growth strategy.

In view of the recent rally, I do not want to build a position at present, but if there is a callback, I will consider buying it.

01 recent success

Lululemon achieved strong international growth in the fourth quarter of 2018 - Asia's growth of 70%, Europe's growth of 55% - and online sales by 46%.

Revenue growth based on stores is achieved through the combination of new stores, store pformation and expansion, and comparable growth in same store revenue.

The company is built on the basis of women's success through continuous product innovation, especially at the bottom, and the bottom is still a strong source of revenue growth.

But this success is not confined to women.

Facts have proved that men are also the driving force of the company's growth.

I haven't studied this company for at least 5 years before reading Lululemon for this article.

As a man, I have never been a customer, and I have always been skeptical of what the company claims to become a brand that resonates with men.

Nevertheless, the growth of male products in 2018 was also very strong.

In the fourth quarter of this year, sales of men's underpants increased by 28%. The company ranked men's trousers as one of the targets for strong growth in the next 5 years.

02 the next five years

Lululemon plans to expand substantially in the next 5 years to achieve some rather aggressive growth targets.

The company plans to keep revenue growth below 10% and expects EPS growth to exceed revenue growth.

The company cited three positive growth areas to support its growth ambitions.

First, Lululemon expects that international sales will increase 4 times in the next 5 years.

Outside North America, sales in 2018 were $360 million, a compound growth rate of 40% since 2015.

The company will have to increase its international sales by more than 30% per year to quadruple it in 5 years.

According to the company's performance record since 2015, it seems feasible unless the global recession comes earlier rather than later.

Considering our market situation, this is entirely reasonable.

Second, the company estimates that male sales (now accounting for 21% of the company's total revenue, 691 million US dollars) will double in 5 years.

Third, the company also wants to double the number of sales.

In addition to these specific growth targets, the company also plans to continuously innovate and enter new markets.

One of the new markets will be footwear.

At present, there are few details about the footwear scheme. The company pointed out that more details will be announced later this year in the analyst's conference call.

The company has recently entered the self-care market.

The company said that before deciding to enter these markets, it had studied footwear and self care and conducted market tests.

The CEO is particularly interested in footwear. He said he saw a lot of blanks in the Lululemon market.

03 about men

As a man, I never went shopping in Lulu lemon, nor did I know who bought it.

In looking back at the analyst's data, I was really surprised that men's income now accounts for 21% of the company's total revenue, and this category will become one of the three growth drivers of the company in the next 5 years.

I have always been skeptical of Lulu lemon brand, and I think it will not cause widespread sympathy among men.

If we compare 19.13,0.60,3.24% (UA) with Lulu lemon (Lululemon), Andrew first is a male sports brand, and needs to diversify the female category to support the company's ambition to increase its income by more than 20%.

At first, I thought Andemar was a masculine brand, which resonated with those muscular male athletes, who thought they were muscular or wanted to show masculinity in the gym or in public.

Andemar brand has a mentality related to men, and Nike (83.67,1.14,1.38%) (NYSE:NKE) has not really taken advantage of this mentality.

On the other hand, Lululemon was initially a purely feminine brand.

The name "Lulu lemon" is completely different from the feeling I got from the name "Under Armour".

Lululemon means femininity.

The meaning of Uner Armour is just the opposite.

Yoga was first seen as a sport pursued by women in China. But in recent years, yoga has been accepted by men as a form of exercise.

At the analysts' day's conference call, the CEO said the company was no longer just a yoga clothing company.

He said the company's aim is "sweatlife".

The company intends to provide services for any fitness person.

Although I have some opinions about the potential of Lululemon and its potential in the male market, the growth figures of the men's wear market are self-evident. The company believes that Lulu lemon still has great room for development in the male market.

It will be interesting to observe this trend, but I doubt if Lululemon will become a brand that can resonate equally between men and women.

04 valuation

Compared with competitors such as Nike (NKE.US) and Andemar (UAA.US), Lululemon's P / E ratio, P / E ratio and price earnings ratio relative to free cash flow are very high.

Nevertheless, Lululemon is growing much faster than the two companies. Its performance in 2018 is also excellent, and Under Armour is in a turning stage. It seems that it will no longer achieve the low level of Lululemon growth in the next 5 years.

Lululemon's free cash flow has increased by nearly 20% annually in the past ten years.

If anyone thinks that Lululemon will grow strongly in the next few years, then he has reason to buy Lululemon at the current price with the discount of free cash flow valuation.

Nevertheless, it remains to be seen how the company's new growth pillar will play its role.

If we are at the peak of the economic slowdown, the growth expectation in the next 5 years is likely to be largely lost.

If China's trade tensions weigh on the stock market next year, I may consider increasing Holdings under a less valued value.

The company has a strong brand and continues to resonate with women.