Consumer Goods | Canada
Equity Value (Δ)
Source: Bloomberg end of day market data; not adjusted for dividends (March 19, 2020).
Lululemon Athletica (“Lululemon”) is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and other fitness pursuits.
WSD Capital Management announced its short position in Lululemon on October 24, 2016. We believe the athleisure segment has reached peak growth and Lululemon’s rich valuation in particular is at risk of a severe re-rating due to intensifying margin pressure and weakening pricing power, store traffic, and sell-through on new product mix.
In March 2017, the athletic wear maker’s stock suffered its biggest selloff in over 8 years as multiple sell-side analysts lowered their ratings and price targets following a disappointing fourth-quarter earnings report. Of the 36 analysts surveyed by FactSet, no less than half cut their stock price targets citing slowing sales, weakening comps, and limited visibility on a recovery.
Lululemon, which has typically relied on grassroots marketing, will launch its first global brand campaign in May 2017, which shows how competitive the athleisure segment has become and that the company is not immune from the overall poor trend in the retail environment.
We exited our short position in Lululemon in March 2020.