Steve Mandel's Second Increase After LULU Yoga Pants Crisis

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The ultimate yoga pants quality check came from the top. Meeting "unacceptable levels of sheerness" and the recall crisis head on, Lululemon Athletica's CEO Christine Day said, "The only way you can test for the pants is put the pants on and bend over."

The Lululemon brand received plenty of attention last month for its chic workout apparel, thanks to the historic "see-through yoga pants" glitch that went viral and created a frenzy of media pokes and jokes. But it's not stopping billionaire Gurus from investing in a company known for having some of the highest margins in the retail industry.

Legendary hedge fund investor Steve Mandel , founder of Lone Pine Capital LLC, added to his Lululemon Athletica Inc. ( LULU ) position by 16.6%, as of April 15, 2013, in spite of the athletic apparel company's recent quality nightmare about the inadvertently sheer stretch pants. In a certain light, at a certain angle, the pants became transparent as too many yoga buffs discovered in real time and started complaining to the company. The Taiwanese manufacturers said they were following the specs, proving once again that quality has to check everything, even the lighting that surrounds the product.

The quality error and resulting recall will cut Lululemon's revenue by $45 million to $50 million for the rest of 2013, according to the Wall Street Journal. LULU's stock price began to fall around March 15, 2013, as the news spread but the share price is gradually climbing back up.

As of April 15, 2013, Steve Mandel owns 5,632,431 LULU shares, making an impact of 0.35% on his equity portfolio. Mandel's LULU holding history shows an average cost per share of $51 with a gain of 39% since fourth quarter 2011.



Lululemon Athletica Inc. has a market cap of $7.96 billion; its shares currently trade at around $69.68 with a P/E ratio of 37.8 and a P/S ratio of 7.5. Lululemon Athletica Inc. had an annual average earnings growth of 54.7% over the past five years, and is ranked higher 98% of 41 companies in the industry for revenue. The stock is down 4% since January, and off 5% over the last 12 months.

GuruFocus performed another financial and performance checkup on LULU and found three good signs recently: Lululemon Athletic Inc. has no debt, and the company's operating margin is expanding, usually a good sign. LULU's P/B Ratio (8.82) is close to a three-year low of 8.61.

The Lone Pine Capital website is closed to the public, but according to GuruFocus research as of April 15, 2013, Steve Mandel's portfolio has 52 stocks, 12 of them new, with a total value of $15.9 billion, and a quarter-over-quarter turnover of 26%.

Mandel's other top buys, sells and holdings:



GuruFocus "Real Time Picks" reports the stock purchases and sales that Gurus have made within the prior 2 weeks. The report time lag can be as short as 2 days after the date of the transaction. This feature is for Premium Members only. If you are not a Premium Member, we invite you for a 7-day Free Trial.

Find stocks on a 52-week low here.About GuruFocus: GuruFocus.com tracks the stocks picks and portfolio holdings of the world's best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world's best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing

Referenced Stocks: LULU

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