Lululemon Is Also Facing Expansion Pressure.

The company based in Vancouver, Canada, has achieved a good market share in the field of competitive sportswear. It has no advantage in the competition with famous brands such as Nike, Adidas and Under Armour, and even has a slight advantage in word of mouth in Andemar.

At present, Lululemon (LULU. US) brand is already becoming the pronoun of quality, because its jacket, trousers, shirts, shoes and shorts are made of advanced patent materials, light and easy to wear, and can also absorb sweat. These products are not only of high quality, but also enable Lululemon to enable customers to pay a high premium. In addition, Lululemon is planning to add fitness areas to 65% of its stores, and add value to yoga classes and other fitness classes.

Such a high number of consumer customers is likely to continue to grow. The current trend is that more and more people are taking part in physical exercise, especially at home, especially yoga. The casual style clothing provided by Lululemon can be worn in the gym or outdoors, and the company has the ability to control the trend of "sports and leisure". We have every reason to believe that the brand can develop well.

From the data of income and net income in the past 5 years, we can see that the pace of development has been very solid so far.

Quarterly reports in the current fiscal year show that such a trend has not diminished.

Lululemon's profitability is unquestionable, especially its operating profit margin (the past 12 months) is 21.45%. Although shareholders did not receive dividends, 37.05% of the return on equity (tracking 12 months) showed that they had benefited from Lululemon's stock. Looking forward to the future, as Lululemon's reputation in the Chinese market has been established, shareholders of the company will probably continue to benefit.

Lululemon's current strategic goal is to double the sales of men's clothing and digital business by 2023 and quadruple the sales volume of international business. From the data point of view, we expect the company's earnings per share in the next five years to grow by 21.18%, which indirectly directing the feasibility of the company's strategy.

Financially, Lululemon can face the future bravely. The long-term debt of US $563 million 930 thousand is offset by the net value of US $1 billion 650 million, and the current liabilities of US $574 million 770 thousand are offset by US $1 billion 450 million in current assets, US $586 million 150 thousand in cash and $35 million 740 thousand in accounts receivable. The company is in a favorable position and may pay dividends at a certain time or participate in share repurchase.

Nonetheless, the valuation seems to be somewhat high on the company's share price alone. In terms of each indicator, its valuation exceeds that of the apparel manufacturing industry and the S & P 500 index (S&P 500).

This is also the reason why I am more and more disapproving of the use of lateral valuation by the major institutions to measure the value of the company. In terms of Lululemon, there are no second sports brands with the core of fitness clothing as a comparison, and whether the area of fitness clothing can be accurately covered by standard & Poor's also requires a question mark.

But even in terms of valuations, there are still obstacles to be ignored in the future of Lululemon.

First of all, the high price of its high-end products has hindered its scale growth, which means that only high-income customers can use their products to keep low-income customers away. Competitors such as Nike and Adidas can retain these customers, hindering the growth of the company's market share from one aspect. But this price is like a double-edged sword, confirming the high net worth attribute of its core customers and ensuring certain stability.

The most interesting point is that we speculate that the price of the brand is very low for expansion, and the greater possibility is to expand the sub line brand to meet the needs of the middle and low end customers, or simply abandon other markets and focus on serving the high-end fitness market.

At the same time, competitors such as Nike and Adidas also retain two key advantages. They have more brand recognition than Lululemon first entered China and in the market.

If we want to overcome these two advantages, we believe that the market will soon be able to test the strategic intentions of Lululemon, especially when the two companies have greater capital advantage, believing that it will not be a simple battle for Lululemon.

As mentioned above, so far, the share of Lululemon in the clothing market is indeed commendable, but whether it can occupy a place in the market like its well-known competitor is still to be observed, and it is rational to raise doubts about its expected growth.