Hello everyone, and welcome back to Investing with Antoaneta.
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Today, I’ve got a new Stock blog for you. This time, we’re looking for a brand-new (or, well, at least for this platform) company. And it’s not even a tech stock! I often bring up the importance of keeping a well-diversified portfolio, but after looking at my recent releases, I realized that I’ve spent the last few months talking just about tech stocks. So, I felt that a blog about a business from a different field is in order.
Of course, this isn’t just “any” company. I wouldn’t ever post a blog about a business that I personally don’t understand or believe in because it just wouldn’t feel right. No, Lululemon really does tick all my “good investment target” checkboxes, and I’m a big believer in their future. And, in this blog, I’ll show you exactly why that is. Check out my other blogs such as, “Top 3 Strategies to Quickly Grow Your Business“.
So, here’s the quick rundown:
Is a clothing manufacturer based in Canada. They’ve been in business since 1998, and they’re one of the few retailers which managed to actually grow significantly during the global health crisis. Before the lockdowns, most of their sales were made via physical stores, so they’re expected to benefit from the loosened restrictions in a big way.
So, back in 2019, Lululemon listed three primary goals for the following years – innovation, expansion, and guest experience. And a quick glance at the numbers is all it takes to see that they’ve massive progress.
The innovation part is pretty standard. Every really successful business has to innovate in one way or another. There are no exceptions to this – if you don’t innovate, the competition will snatch up your customer base. And Lululemon has demonstrated an excellent ability to innovate. Back in 1998, when they first opened for business, the company’s main focus was yoga clothing. Yoga stuff, in general, was pretty popular back then, and they pretty much managed to hit the nail on the head with this. Eventually, they branched out into the broader activewear categories and added a ton of products for men and girls. As a matter of fact, Lululemon can be credited as pioneers of the whole “athleisure” trend, which brought in significant profits and allowed them to grow even further.
But they still felt like they could do better. So, as soon as they noticed the field becoming saturated with athleisure products, they branched out again and added various loungewear, sweaters, dresses, and semi-casual clothing to their catalog. Currently, they’re aiming to double their men’s clothing sales levels by 2023. And they’re well on the way to achieving this goal because their men’s clothing sales make up almost 25% of their total sales.
The second big thing they’re shooting for is market expansion. Lululemon is determined to also quadruple its international sales levels by tapping into the East Asian and European markets. Here, they also seem to be on the right track. Their last quarter international sales numbers show an increase of nearly 500 million dollars year-over-year (they went from 359 million all the way up to 836 million), and they’re showing no signs of slowing down.
The final goal is to bring the so-called “Omnichannel” experience to customers online. Basically, they want to increase their online sales and diversify their customers’ engagement with the brand. The aim here was to double their online sales by 2023, and, thanks to the massive global increase in online shopping, they’re pretty much halfway there already. For 2020 alone, their online sales have already doubled.
Now, before you ask, the loosening restrictions are not harming their sales, and there’s very little reason to believe that could happen at any point in the near future. Even during the pandemic, when retail stores were under strict limitations for the number of clients on-site, clients were still happy to line up outside and wait for their turn to shop. Then, when the restrictions started falling off, Lululemon registered a massive surge in sales – store revenue went up by 106% while online sales climbed 55%.
Why I believe in the future of Lululemon
Lululemon has demonstrated the ability to grow and deliver solid and consistent results. Or, in other words, this is exactly the type of stock that I, as a long-term investor, am looking for. They’re already halfway to reaching the goals they set out to achieve, and they’re not even near done with the new stuff. They’ve also got a brand-new product line in the works – their first-ever shoe line, scheduled to make an appearance by the end of this year and is expected to hit the stores in early 2022.
Currently, the global athletic shoe market is primarily dominated by Nike and Adidas. This presents a lucrative opportunity for Lululemon with its expertise in stylish athleisure equipment. They might not surpass the giants in sales just yet, but the potential is definitely there. If their debut goes well, it’s also reasonable to expect a spike in investor interest, which is a big part of why I’m trying to add as much Lululemon to my portfolio as I can while the stock is still undervalued.
The potential problems
As always, it’s important to remember that, when it comes to the Stock Market, nothing is set in stone. Things can and most certainly will change. And while I have plenty of reasons to believe that the majority of changes will benefit Lululemon, there’s also a couple of things that I’d like to point out here:
- There’s absolutely no way to predict how things will go on the shop front. They might do exceptionally well because of their strong brand presence, but they might also mess up with the logistics and manufacturing.
- Even if everything goes great, their shoe lines are almost guaranteed to bring in lower margins compared to clothing. Diversification is great and everything, but it’s unreasonable to believe that the company will somehow 10x its value overnight or something.
- When it comes to companies like Lululemon, brand image and public perception are everything. If the management or marketing teams make some big mess-up, everything could go south really, really fast.
I’m very positive about Lululemon. The company definitely has a ton of potential and a lot of room to grow, but I’m not in a rush. So, I’m going to stick to my standard approach, look for good deals (dips) and slowly add to my position over time.
And that’s about all I’ve got for today! I hope you enjoyed it, and if you did, please don’t forget to give me a like and share this blog with your friends. If you’ve got questions or ideas about stocks or subjects for future blogs, just drop me a line in the comments below, and I’ll see what I can do.
Oh, and if you’re looking for more of the same, there’s always our Private Investing Group. Just follow the link in the description and get access to a ton of in-depth analysis blogs, a bunch of exclusive courses, and the ability to chat with me and all of your fellow investors in real-time!
Thank you all for reading, and until next time!
Recommended books for further reading:
- Business Secrets from the Bible – Daniel Lapin
- Keys to Success – Napoleon Hill
- The Business Book: Big Ideas Simply Explained
- The Snowball: Warren Buffett and the Business of Life
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- Passive income
- Silver & Gold coins
- Interactive Brokers
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