Can Lululemon Get its Groove Back?
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Jonathan Yates
Can Lululemon Get its Groove Back?

Lululemon (NASDAQ: LULU), the high end female yoga gear company, should be the ultimate short.

It has a price-to-earnings ratio above 35, well above the average for the Standard & Poor’s 500 Index.  The price-to-book is 10.17, so we are hardly talking about a buy for value investors, here.  Those looking for robust cash flow should go elsewhere too as the price-to-free-cash flow ratio is 10.17.

Lululemon Athletica inc. (NASDAQ:LULU)

Now around $65 a share, Lululemon is down almost 15% for 2013.  But over the last week of market action, Lululemon is trading higher by 5.82%.  This has hardly gone unnoticed by the short community: the short float for Lululemon is 13.61%.  A short float of 5% is considered to be a sign of trouble for a company.

As the chart below shows, Lululemon is a volatile stock.  With a beta of 2.21, it fluctuates more than twice as much as the stock market as a whole.   For those looking to go long or short, there is certainly ample opportunity with Lululemon.   The plunge for Lululemon earlier this year was due to the CEO stepping aside with a successor approved of by Wall Street ready to ascend to the corner office.


Lululemon is a richly valued stock in a highly competitive sector.  Nike (NYSE: NKE) and Gap (NYSE: GAP) have a greater presence and depth, in terms of product lines.  Lululemon is now trading just about halfway between its 52-week high and low.  With the towering short float, there are obviously many expecting to see it crater again.

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