“We are initiating coverage of Lululemon Athletica, Inc. (LULU) with a BUY rating and a $75 target price. Lululemon Athletica is a top specialty retailer focusing on women’s athletic apparel. It offers fashionable, high-quality athletic clothing, and has grown from a single store in 1998 to more than 80 corporate-owned and franchised stores. We note that retail spending on yoga apparel has nearly doubled since 2004, as more consumers have been wearing it as casual clothing, and we expect this trend to continue.
“We also believe that lululemon’s premium brands and technology-enhanced fabrics distinguish it from the competition. Over the long term, we expect the company to grow through unit expansion, further development of its e-commerce business, and the extension of its yoga and running apparel offerings, as well as through the introduction of products for other sports. Driven by 20% same-store sales growth and the addition of nine new stores, 2Q11 net revenue rose approximately 40% from last year to $212 million. Same-store sales were up 30% in the U.S. and Australia, while Canada saw a single-digit increase.”
John Staszak, Argus Weekly Staff Report, 10/23/11