If investors have ever heard of a “downward-facing dog” or “crow’s pose” then they’ve likely heard of the company that clothes yoga practitioners worldwide; Lululemon Athletica Inc (NASDAQ: LULU).
While it predominantly started out as a yoga brand, Lululemon’s winning recipe has been in its extraordinary ability to monetise on its optionality.
First, it broadened its appeal to men by focusing on comfortable workout gear but also made itself the number one brand in the “athleisure” space.
Comfortable, as well as stylish, yoga leggings for women and casual sport-friendly hoodies for men became must-have items in the nascent athleisure trend, with companies like Nike Inc (NYSE: NKE) also jumping on the bandwagon.
However, Lululemon’s first-move advantage and brand recognition in the space has seen it not only maintain, but also grow, its phenomenal success.
The company was one of my top buys for my “Top 5 Stocks to Buy in August” and on Wednesday Lululemon announced its second-quarter fiscal year (FY) 2021 earnings results. They didn’t disappoint.
Hitting new highs
Lululemon’s revenue for the quarter (for the three months ending 31 August 2021) hit US$1.5 billion, up 61% year-on-year.
It was a key beneficiary of the re-opening trend as net revenue from its company-operated stores skyrocketed 142% year-on-year to US$695.1 million.
Lululemon’s gross margin increased to 58.1%, up 390 basis points year-on-year, while its operating margin soared 630 basis points to 20.1%.
All this saw Lululemon shares pop over 10% on Thursday alone, closing at an all-time high of just over US$420.
For investors, Lululemon has been a wonderful stock to hold over the past five years – generating a price return of 537.6%, absolutely crushing the S&P 500’s 110.1% return over the same period.
With a market cap of only US$55 billion, compared to Nike’s US$258 billion, long-term investors can be sure there’s more to come from this athleisure powerhouse.
Source: Google Finance as of 10 September 2021
Disclaimer: ProsperUs Head of Content Tim Phillips doesn’t own shares of any companies mentioned.