Consumer Goods | Canada
WSD Target Price
Annualized Return Since Publication
Target Equity Value (Δ)
Source: Bloomberg end of day market data; not adjusted for dividends (December 8, 2017).
Returns assume a short investment position on the date that WSD Capital Management published its thesis, and an exit on the date that the WSD Target Price is realized.
Returns do not reflect any taxes, fees or dividend and interest expenses related to short sales.
The returns are hypothetical and do not reflect the actual results of WSD Capital Management’s investment activities, nor is it necessarily indicative of future results of WSD Capital Management’s investment activities.
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 in October 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.