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
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
, founder of Lone Pine Capital LLC, added to his Lululemon
Athletica Inc. (
) 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,
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
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
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
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
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