Lulu Lemon (Nasdaq:LULU) is about to release earnings results. Ponder this Bear Case Scenario:
Lulu has grown quickly from one store to over 200 outlets and has suffered from quality control issues. New management is in place but has not proven they have the issues under control.
Lulu’s rapid success has drawn the attention of other well capitalized competitor’s. Gaps Athleta and Lucy have credible and compelling offerings competing in the market place.
Lulu does not own or control any patents or licenses for fabric or design. They can break the ice and be copied immediately if they encounter any commercial success.
Lulu has a premium pricing strategy. Given any economic downturn or hiccup they will correlate with economic realities very quickly. Also the premium pricing makes them an easy target for knock off’s and me too competitors.
George Gutowski writes from a caveat emptor perspective.