1. Healthcare

February 1, 2015
NASDAQ: LULU
LULULEMON ATHLETICA INC
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
NA
B-
C+
C
Annual Dividend Yield
NA
SELL
C-
D+
D
Beta
1.67
Sector: Consumer Goods & Svcs
LULU BUSINESS DESCRIPTION
lululemon athletica inc., together with its
subsidiaries, designs, manufactures, and
distributes athletic apparel and accessories for
women, men, and female youth. It operates in three
segments: Corporate-Owned Stores, Direct To
Consumer, and Other.
Weekly Price: (US$)
D-
E+
E
E-
F
Market Capitalization
$8.9 Billion
BUY
RATING SINCE
TARGET PRICE
52-Week Range
$36.26-$67.71
Sub-Industry: Apparel, Accessories & Luxury Goods
SMA (50)
SMA (100)
11/26/2014
$77.60
Price as of 1/29/2015
$67.19
Source: S&P
1 Year
2 Years
85
80
TARGET
TARGET
TARGETPRICE
PRICE$77.60
$77.60
PRICE
$77.60
TARGET
75
70
65
60
STOCK PERFORMANCE (%)
3 Mo.
Price Change
63.16
55
1 Yr.
47.08
3 Yr (Ann)
1.57
12 Mo.
10.28
-14.82
-14.66
3 Yr CAGR
25.18
12.90
12.66
50
45
GROWTH (%)
40
Last Qtr
10.39
-8.57
-6.67
Revenues
Net Income
EPS
RETURN ON EQUITY (%)
LULU
Q3 2014
21.91
Q3 2013
26.77
Q3 2012
30.56
Ind Avg
23.12
22.08
21.57
S&P 500
14.59
13.97
13.23
41.22
30.41
19.08
LULU
Ind Avg
S&P 500
HOLD
BUY
Volume in Millions
100
50
2013
2014
2015
0
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
HIGHLIGHTS
Despite its growing revenue, the company underperformed as compared with the industry average of 17.0%.
Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue does not appear to
have trickled down to the company's bottom line, displayed by a decline in earnings per share.
2013
Q3 0.42
Q1 0.13
Q2 0.33
Q4 0.75
Q3 0.45
Q2 0.39
LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a
relatively favorable sign. Along with this, the company maintains a quick ratio of 4.36, which clearly
demonstrates the ability to cover short-term cash needs.
Q1 0.32
Q4 0.75
Q3 0.39
Q2 0.39
EPS ANALYSIS¹ ($)
Q1 0.32
BUY
RECOMMENDATION
We rate LULULEMON ATHLETICA INC (LULU) a BUY. This is driven by several positive factors, which we
believe should have a greater impact than any weaknesses, and should give investors a better performance
opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its
solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by
most measures, good cash flow from operations and expanding profit margins. We feel these strengths
outweigh the fact that the company has had sub par growth in net income.
P/E COMPARISON
2012
35
Rating History
2014
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
Compared to its closing price of one year ago, LULU's share price has jumped by 47.08%, exceeding the
performance of the broader market during that same time frame. Turning to the future, naturally, any stock
can fall in a major bear market. However, in almost any other environment, the stock should continue to move
higher despite the fact that it has already enjoyed nice gains in the past year.
Net operating cash flow has significantly increased by 79.50% to $42.86 million when compared to the same
quarter last year. The firm also exceeded the industry average cash flow growth rate of 56.32%.
The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 54.05%. Regardless of
LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed
results of the gross profit margin, LULU's net profit margin of 14.41% compares favorably to the industry
average.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 1
February 1, 2015
NASDAQ: LULU
LULULEMON ATHLETICA INC
Sector: Consumer Goods & Svcs Apparel, Accessories & Luxury Goods Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
PEER GROUP ANALYSIS
35%
UA
V
FA
AB
OR
LE
COLM
Price as of 1/29/2015
$67.19
FOSL
LULU
GIL
While textiles may have once been a large portion of this industry group, that segment is down to a few
players such as Unifi (UFI), Culp (CFI), Crown Crafts (CRWS), and Hallwood Group (HWG). Most of the industry
is focused on brands for shoes, clothing, eyewear, and wrist watches. Companies in the group tend to own a
variety of proprietary brands in order to design, develop, market, and distribute products targeted to specific
consumer segments.
R
VO
FA
LE
AB
-10%
UN
Revenue Growth (TTM)
52-Week Range
$36.26-$67.71
The companies in the textiles, apparel, and luxury goods industry sell their products through multiline
retailers and over the internet. Some of the larger players in this industry group cross over into the specialty
retailer category with exclusively branded stores of their own such as Nike, Coach, Fossil, and Ralph Lauren.
HBI
CRI
RL
PVH
Market Capitalization
$8.9 Billion
INDUSTRY ANALYSIS
The textiles, apparel, and luxury goods industry includes very well-known brands such as Nike (NKE), Coach
(COH), Luxottica Group (LUX), Ralph Lauren (RL), Fossil (FOSL), Under Armour (UA), HanesBrands (HBI),
Columbia Sportswear (COLM), Crocs (CROX), and Movado Group (MOV).
REVENUE GROWTH AND EBITDA MARGIN*
KATE
Beta
1.67
6%
24%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $3 Billion and $12.8 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
35%
REVENUE GROWTH AND EARNINGS YIELD
UA
PEER GROUP: Textiles, Apparel & Luxury Goods
Recent
Ticker
Company Name
Price ($)
LULU
LULULEMON ATHLETICA INC
67.19
PVH
PVH CORP
112.94
GIL
GILDAN ACTIVEWEAR INC
58.57
FOSL
FOSSIL GROUP INC
99.99
CRI
CARTER'S INC
83.85
KATE
KATE SPADE & CO
31.68
COLM
COLUMBIA SPORTSWEAR CO
43.45
UA
UNDER ARMOUR INC
72.80
HBI
HANESBRANDS INC
116.07
COH
COACH INC
38.94
RL
RALPH LAUREN CORP
170.03
Market
Cap ($M)
8,880
9,312
7,174
5,108
4,436
4,027
3,028
12,814
11,594
10,731
10,444
Price/
Earnings
41.22
26.95
20.06
14.62
26.88
35.60
25.86
86.15
29.31
19.09
20.49
Net Sales
TTM ($M)
1,715.72
8,233.36
2,359.99
3,507.27
2,833.39
1,166.97
1,964.12
2,871.93
5,324.75
4,494.04
7,584.00
Net Income
TTM ($M)
237.87
350.04
359.55
371.10
168.83
217.81
118.30
184.50
404.52
568.62
753.00
V
FA
The peer group comparison is based on Major Apparel, Accessories & Luxury Goods companies of comparable size.
AB
OR
LE
COLM
HBI
LULU
CRI
RL
PVH
FOSL
GIL
R
VO
FA
LE
AB
-10%
UN
Revenue Growth (TTM)
KATE
1%
COH
7%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -9.8% and
33.3%. Companies with NA or NM values do not
appear.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 2
February 1, 2015
NASDAQ: LULU
LULULEMON ATHLETICA INC
Sector: Consumer Goods & Svcs Apparel, Accessories & Luxury Goods Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
Beta
1.67
Market Capitalization
$8.9 Billion
52-Week Range
$36.26-$67.71
Price as of 1/29/2015
$67.19
COMPANY DESCRIPTION
lululemon athletica inc., together with its subsidiaries,
designs, manufactures, and distributes athletic apparel
and accessories for women, men, and female youth. It
operates in three segments: Corporate-Owned Stores,
Direct To Consumer, and Other. The company's line of
apparel include fitness pants, shorts, tops, and jackets
for healthy lifestyle activities, such as yoga, running, and
general fitness. Its fitness-related accessories comprise
bags, socks, underwear, yoga mats, and water bottles.
The company sells its products through a chain of
corporate-owned and operated retail stores; direct to
consumer through e-commerce Websites; and a network
of wholesale channel, such as premium yoga studios,
health clubs, and fitness centers. As of February 2, 2014,
it operated 254 stores in the United States, Canada,
Australia, and New Zealand under the lululemon
athletica and ivivva athletica brand names. lululemon
athletica inc. was founded in 1998 and is based in
Vancouver, Canada.
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of LULU shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
LULULEMON ATHLETICA INC
1818 Cornwall Avenue
Vancouver, BC V6J1C7
USA
Phone: 604-732-6124
Fax: 604-874-6124
http://www.lululemon.com
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 90% of the companies we review.
FACTOR
SCORE
5.0
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, LULU has a growth score better than 90% of
the stocks we rate.
strong
3.0
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 50% of the companies we
cover.
strong
5.0
strong
2.5
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 40% of the stocks we monitor.
strong
5.0
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 90% of the companies we analyze.
strong
0.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. This company
pays no dividends.
strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 3
February 1, 2015
NASDAQ: LULU
LULULEMON ATHLETICA INC
Sector: Consumer Goods & Svcs Apparel, Accessories & Luxury Goods Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.73
1.82 E
2.08 E
Q4 FY15
2015(E)
2016(E)
Beta
1.67
Market Capitalization
$8.9 Billion
52-Week Range
$36.26-$67.71
Price as of 1/29/2015
$67.19
FINANCIAL ANALYSIS
LULULEMON ATHLETICA INC's gross profit margin for the third quarter of its fiscal year 2014 has decreased
when compared to the same period a year ago. Even though sales increased, the net income has decreased.
LULULEMON ATHLETICA INC is extremely liquid. Currently, the Quick Ratio is 4.36 which clearly shows the
ability to cover any short-term cash needs. The company's liquidity has decreased from the same period last
year.
At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by
4.07% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is
very unlikely to face financial difficulties in the near future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q3 FY14
419.40
96.77
81.16
60.45
Q3 FY13
379.90
105.25
92.34
66.11
Q3 FY14
633.58
1,284.49
0.00
1,085.26
Q3 FY13
600.75
1,174.55
0.00
1,042.76
Q3 FY14
54.05%
23.07%
19.35%
1.34
18.51%
21.91%
Q3 FY13
57.26%
27.70%
24.31%
1.32
23.77%
26.77%
Q3 FY14
6.39
0.00
NA
NA
Q3 FY13
9.31
0.00
NA
NA
Q3 FY14
142
0.00
0.42
7.63
NA
3,047,879
Q3 FY13
145
0.00
0.45
7.18
NA
2,723,411
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 4
February 1, 2015
NASDAQ: LULU
LULULEMON ATHLETICA INC
Sector: Consumer Goods & Svcs Apparel, Accessories & Luxury Goods Source: S&P
Annual Dividend Rate
NA
Annual Dividend Yield
NA
RATINGS HISTORY
Our rating for LULULEMON ATHLETICA INC was
recently upgraded from Hold to Buy on 11/26/2014.
As of 1/29/2015, the stock was trading at a price of
$67.19 which is .8% below its 52-week high of $67.71
and 85.3% above its 52-week low of $36.26.
BUY: $48.34
HOLD: $44.78
BUY: $69.83
2 Year Chart
$100
$75
$50
2013
2014
MOST RECENT RATINGS CHANGES
Date
Price
Action
11/26/14
$48.34
Upgrade
2/3/14
$44.78 Downgrade
1/29/13
$69.83 No Change
Price/Earnings
1
2
3
premium
From
Hold
Buy
Buy
To
Buy
Hold
Buy
(as of 1/29/2015)
47.87% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
29.29% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
22.83% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
52-Week Range
$36.26-$67.71
Price as of 1/29/2015
$67.19
4
5
LULU 41.22
Peers 30.41
• Premium. A higher P/E ratio than its peers can
signify a more expensive stock or higher growth
expectations.
• LULU is trading at a significant premium to its
peers.
1
2
3
4
5
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
LULU NM
Peers 4.31
• Neutral. The PEG ratio is the stock’s P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• LULU's negative PEG ratio makes this valuation
measure meaningless.
Earnings Growth
1
2
3
4
lower
5
higher
LULU -14.66
Peers 85.60
• Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• However, LULU is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth
discount
LULU 5.57
Peers 2.82
• Premium. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• LULU is trading at a significant premium to its
industry.
3
LULU 27.59
Peers 28.29
• Average. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• LULU is trading at a valuation on par to its peers.
discount
LULU 8.81
Peers 6.82
• Premium. A higher price-to-book ratio makes a
stock less attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
• LULU is trading at a significant premium to its
peers.
2
premium
discount
LULU 32.30
Peers 29.29
• Premium. A higher price-to-projected earnings ratio
than its peers can signify a more expensive stock
or higher future growth expectations.
• LULU is trading at a significant premium to its
peers.
Price/Book
1
Price/CashFlow
discount
premium
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
Market Capitalization
$8.9 Billion
VALUATION
BUY. LULULEMON ATHLETICA INC's P/E ratio indicates a significant premium compared to an average of
30.41 for the Textiles, Apparel & Luxury Goods industry and a significant premium compared to the S&P 500
average of 19.08. For additional comparison, its price-to-book ratio of 8.81 indicates a significant premium
versus the S&P 500 average of 2.69 and a significant premium versus the industry average of 6.82. The
price-to-sales ratio is well above both the S&P 500 average and the industry average, indicating a premium.
Upon assessment of these and other key valuation criteria, LULULEMON ATHLETICA INC proves to trade at a
premium to investment alternatives within the industry.
Price/Projected Earnings
Price reflects the closing price as of the date listed, if available
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Beta
1.67
1
2
3
lower
4
5
higher
LULU 10.28
Peers 13.07
• Lower. A sales growth rate that trails the industry
implies that a company is losing market share.
• LULU trails its peers on the basis of sales growth
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.
Report Date: February 1, 2015
PAGE 5