Yoga buffs gather round. In yoga class, there's nothing worse
than taking "downward dog" position with your posterior high in
the air and wondering if the people in the row behind you can
actually see your "root chakra." Take heart, because those people
may also be wearing the popular Lululemon (
) brand's latest quality nightmare, inadvertently see-through
yoga pants. Lululemon's CEO Christine Day was to the point: "The
only way you can test for the pants is put the pants on and bend
over," according to The Star. The company's recent quality glitch
could cost the company as much as $67 million this year,
according to the company's CFO John Currie.
LULU's stock price
began to dive on March 15, 2013, as the news spread.
Cashing in on "cultural creatives" as a consumer sector and
addressing the needs of a new generation of yoga lovers across
the US, this chic brand of athletic performance clothing urges us
to "get off the fence" and "take the road less traveled." When
the yoga and fitness craze expanded, Lululemon began delivering
something consumers really wanted and could not easily find, chic
workout gear. We could now trade in our grungy sweat pants for a
Billionaire hedge fund investor Steve Mandel, founder of Lone
Pine Capital LLC, is one Guru who recently added to his LULU
position, in spite of its recent quality issues. Guru
reduced his LULU stake by 95.63% and
reduced its stake by 50%, all as of quarter ending Dec. 31, 2012.
Lone Pine's website is closed to the public, but various sources
say that the fund has $20 billion in assets under management.
With a reputation for thorough analysis and "bottom-up"
investing, Mandel focuses more on understanding a company's
fundamental business than its macro environment of events,
indicators, and economics.
As of Dec. 31, 2012,
owns 4,830,386 shares of LULU, valued as $368 million, and
accounting for 2.3% of his equity portfolio. Steve Mandel added
his positions in the Sept. 30, 2012 quarter by 13.19%, again in
the Dec. 31, 2012 quarter by 1.28%.
Lululemon Athletica, Inc. has a market cap of $7.23 billion; its
shares currently trade at around $62.31 with a P/E ratio of 39.64
and P/S ratio of 7.5. Lululemon Athletica Inc. had an annual
average earnings growth of 54.7% over the past 5 years, and is
ranked higher 98% of 41 companies in the industry for revenue.
Mandel's holding history also shows LULU's dramatic price ascent
GuruFocus performed a financial and performance checkup on LULU
and found mostly good signs: Lululemon Athletic, Inc. has no
debt, and the company's operating margin is expanding, usually a
good sign. LULU's P/B Ratio (12.14) is close to a two-year low of
11.21, and its P/S Ratio (7.5019) is close to a two-year low of
6.89. One warning sign is that the company's assets are growing
faster than its revenue growth. GuruFocus rated Lululemon
Athletica Inc. the business predictability rank of 3-star.
Lululemon Athletica Inc. has some of the highest margins in the
Mandel's other top buys, sells and holdings:
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