Here is an article from Investopedia:
When the stock market is jerking up and down as it has been recently, investors must try and find their "happy place". What better way to relax and feel good than a session of yoga to release your endorphins?
Enter Little Lulu
Lululemon Athletica (Nasdaq: LULU ) knows exactly how important it is to yoga-goers to feel and look good in their workout clothing. The retailer specializes in women's clothing designed for yoga, dance, running and general exercise. It's a relatively new player but it's recent numbers and unique niche mean it could be ready for a growth spurt.
At this time, the company is also expanding into undergarments and outerwear lines as it attempts to grow the men's division.
The company operates about 60 franchised or company-owned stores, with the majority in Canada, where the company was founded. Aside from Canadian locations, the company has 15 U.S. stores, three in Japan and one in Australia.
Recent IPO
Since opening its first store near the beach in Vancouver, the company has been expanding rapidly and in July it began trading on the Nasdaq (Nasdaq: NDAQ ) stock exchange. After pricing the IPO at $18, the stock opened above its range and within a few weeks doubled in price.
The money the company raised through the public offering will be used to fund new store openings, working capital and other general corporate purposes. Unfortunately, the company was not clear on how much capital will be allocated to each area. Funding new stores is a great use of the cash; however, if general corporate purposes turns out to be code for higher salaries for executives, there could be trouble over the long-term. This is something to watch as the company begins reporting earnings over the next few quarters. (For greater insight, check out Evaluating Executive Compensation .)
Inaugural Earnings Report
On September 10, Lululemon announced its first earnings numbers as a publicly traded company in the United States. For the quarter ended July 31, 2007, net revenue increased 80% to $58.7 million versus $32.5 a year earlier. Operating income shot up 202% to $9.8 for the quarter and came in at 17% of revenues. The diluted earnings per share checked in at 7 cents versus 3 cents last year.
Over the next two quarters, Lululemon plans to open 17 new stores in North America on top of the eight they already opened in the first two quarters of their fiscal year 2007. Expectations are for another 30 to 35 new stores in 2008, which will nearly double the current total.
When providing an outlook for investors, the company said its long-term annual financial targets include same store sales growth in the high single-digit range, net revenue growth of approximately 25% and diluted EPS growth in excess of 25%. Based on results in the first half, the company expects diluted EPS of 30 cents to 33 cents in fiscal year 2007, including 5 cents to 6 cents in the third quarter.
Lulu Lemoneymaker
Lululemon is clearly in the early growth stages of the business cycle , which is typically where investors want to buy into a stock. The question is whether the company will manage its expansion plans effectively or will it multiply too fast and outgrow its unique opportunity.
There is no doubt the niche "yoga-inspired" lifestyle is hot right now. Everywhere from Boulder, Colorado to mid-town Manhattan, this is a new way of living that is not only hip, but healthy. If you do not believe a niche retailer can return big profits, please take a look at Under Armour (NYSE: UA ) and Crocs (Nasdaq: CROX ). Both companies' products are now household names in the U.S. and abroad. As long as Lululemon can continue to offer fashion that is comfortable and ahead of the curve, the future looks promising.
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