Lululemon Athletica (Nasdaq:LULU) held a public crucifixion and whacked the boss. Christine M Day. Ms. Day joined Lululemon in 2008 and quickly became the President.
Lululemon has had its history of controversy. An original guiding started as a scout in the oil business which is a very nice way of describing a corporate spy. They had the Where is John Galt controversy. There were the trans-dermal claims that certain yoga wear was nutritious. Busted by New York Times is an unusual and brilliant collaboration between the fashion editor and the science and technology editor. They recently had the incredibly sheer yoga pant controversy. Manufacturer insists that they did not make substitutions. Product sold out after what everyone thought was a negative event.
Despite the rough edges the stock trades at a 36 PE ratio. The chairman Dennis Wilson, who also is synergistically involved in a surf board company, upon firing Christine M Day also sells at lot of stock under a pre-established program and makes out like a bandit. Lululemon insists nothing untoward. But the timing of the termination could have been reverse engineered to fit the timing of the plan which I’m sure was known to all involved.
The company has no debt and is growing. I am not a fashion guru but how large a moat can they have around them. Women look good in Lululemon wear but the design is easily copied. The company could use some good management and that means replacing the board as well as a new president.
But who wants to come on board. Stock options are big but when you look at a 36 PE where is the stock going to go. A sale might be in order after they decide all the possible presidents are not that interested. But who will want to trump a 36 PE and why would you do that.
So out swims the Black Swan. The Black Swan swims because it can. The company has been accidentally dropping hand grenade after hand grenade. The law of unintended consequences will eventually kick in and market value will drop. It’s like playing Russian Roulette eventually the bullet fires.
So why buy a stock at 36 PE. absolutely no reason. the chairman is selling big time. The next train stop on calamity railways will burn shareholder value as the stock drops. Black Swan reigns. Then it makes sense to make an offer. In the meantime lighten the load a lot.
George Gutowski writes from a caveat emptor perspective. Lululemon makes women look good. No question.
Lululemon (Nasdaq:LULU) stretched fashion too far and tried to sell a yoga pant which is too sheer for general community use. A full refund is offered. The initial word is a supplier made a mistake. The supplier has worked with Lululemon before.
So Lululemon has a production quality control problem and relies blindly on its supply chain. Now the stock has blown off its quarterly earnings and confusion abounds. The mistake is unacceptable. Lululemon took its eye off the ball and went to sleep. you cannot do that with vendors and supply chain management. In the world of fashion apparel the faux pas is death. Watch for several executives to start looking for work and here is why. The board has several retail savvy directors. They should know which questions to ask. Look for the following to offer some leadership:
Brad Martin 60. Director since 2007. CEO of Saks 1989-2006 and a director of Dillards. Gotta be shaking his head and having a WTF moment.
Michael Casey 66 Director since 2007. He retired from Starbucks as the CFO. starbucks buys its coffee all around the world and knows supply chain.
Robert Bensoussan. Fmr CEO of Jimmy Choo and now an investor in brands and retail. Jimmy Choo pedigree is hard to argue with.
Jerry Stritzke 51 President and CEO of Coach since 2008. Previously held several executive positions with Limited Brands.
You have to remember this is the same company who attempted to market a T-shirt which had supposed transdermal properties until the New York Times busted them with the help of some rigorous scientific analysis.
Then there was the Ann Rand shopping bag thing which is so unlike Yoga. But we all knew that.
So these retail guru’s are gonna take care of business. Right. I mean if they can’t who can? Like all these yoga women were going to be accidentally naked.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter@financialskepti or maybe follow his evil twin who is writing a Wall Street Murder Thriller at twitter@georgegutowski
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lululemon (Nasdaq:LULU) increased guidance claiming that the inventory problem that everyone was complaining about was really a silver lining in storm clouds which did not amount to anything. Read this quote from Christine Day, lululemon’s CEO:
“Our work throughout the year building our inventory position is driving our success in the fourth quarter.”
Investors know that you do not need to build inventories for a whole year just to hit the Christmas sales cycle. Orders can be filled quickly by contract plants who are always looking for work. Modern day logistics and transportation will get product on shelf in no time. So the year-long inventory build is dubious at best.
Lets not forget that just a few days ago lululemon also issued a press release announcing Chip Wilson, founder, Chairman of the Board and Chief Innovation and Branding Officer of lululemon athletica plans to resign his executive position of Chief Innovation and Branding Officer effective January 29, 2012. Mr. Wilson will continue to serve as Chairman of the Board of Directors of lululemon.
Everyone was too polite to remember the “Where’s John Galt” debacle. Many believe that Chip Wilson demonstrated a lack of understanding of the core customer who may not be a true Ayn Rand aficionado. All the while John Galt wanted to know why the inventory was so high.
I any event Christine Day’s comment attempts to position lululemon for the future. I’m not sure investors should accept a year long inventory build. No one else has to do it this way. So now read the rest of the bosses comments “Guests have responded exceptionally well to the robust assortment and bright color palette for holiday, and momentum continues with the new spring product offerings.”
While the consumer may have skated lululemon onside the gamble was unnecessary. If they keep throwing the dice the same way sooner rather than later they will be taken to the cleaners.
All this come out just one day before management will be presenting at the ICR XChange Conference on Wednesday, January 11, 2012 in Miami, Florida. Presumably nothing material is on the horizon.
George Gutowski writes from a caveat emptor perspective.
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LuLuLemon (Nasdaq:LULU) recently pulled their very wrong “Where is John Galt” shopping bags. Don’t get me wrong. I would like to find out where John Galt is and invest a few bucks myself. But in terms of the yoga sensitivity the bags backfired and Lululemon has probably pissed off way too many clients, while lossing money foolishly.
So what does it all mean? LuluLemon wear is a statement. The majority of clients do not pine for John Galt. They would be very appalled if John Galt ever showed up in their lives. LuLuLemon executives did not understand this. The mis-read is fundamental. Which means the company does not understand their market. Not only is there a Black Swan in their future it might be a whole flock.
Not that long ago LuLuLemon was marketing a yoga top or T-shirt of some sort that promised to provide some form of trans-dermal nutrition. you know like a nocotine patch. Now if I remember the story correctly some of the fashion writers and editors at the New York Times found this curious (Yes it would be the New York Times). Apparently they purchased several said items and marched down to their colleagues in the Science and Technology who also found it curious.
Scientific testing was applied and corporate claims of nutrition were found to be laughably bogus. LuLuLemon was caught like a deer in the headlights. Executives were truly confused. LuLuLemon seems to be able to find every pothole on the road. Just like a lot of people suspected, NYT hates faux left-wing. they just will not tolerate it. The New York times is also publicly traded on NYSE (NYSE:NYT) LuluLemon only trades on Nasdaq (Nasdaq:LULU) So LuLuLemon has less class.
Don’t get me wrong. I have nothing against Yoga. Have attended a few classes and probably should sign up for some more. Maybe LuLuLemon exec’s should sign up for a few yoga classes themselves. Maybe LuLuLemon executives should get in touch with their market. Maybe LuLuLemon is going to become roadkill?
George Gutowski writes from a caveat emptor perspective.
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Lululemon Athletica ( Nasdaq:lulu) has had a spectacular run. When they start launching mens wear and try expanding the brand you know it will be time to sell. How’s my butt look does not work for real guys who spend money on athletic gear. You see we call it gear not wear. That’s different.
Disclosure: George Gutowski writes from a caveat emptor perspective. I do not care how my butt looks. Well within manly reason. I do not have positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. I have no plans to shop at Lululemon. I get too confused. Women who wear Lululemon usually look pretty good.
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Lululemon (LULU) is delighting shareholders with huge one day increases. It seems to be the retail stock du jour. Probably going to the moon in valuation. But lets take a quick look at the leadership. This is a retail stock who nailed a market segment namely yoga style pants for women.
The Board of Directors has only one director who has retail experience. R. Brad Martin aged 58 used to run Saks incorporated. He is the lead director. Clearly he has merchandising experience which hopefully broadens out to fashion and product marketing.
The chairman of the board is Dennis J William aged 54. He is the founder so for now he still gets to be the chairman. But as Lululemon grows will he have the expertise to handle something bigger? Thats a bet investors need to be comfortable with. He is also the Chief Innovation Officer and Chief Branding Officer. Those two functions should not emanate from the board. These functions clearly belong with the marketing group.
Christine Day aged 48 is the CEO and sits on the board. But clearly she is not an independent voice.
The rest of the board consisted of financial types.
Disclosure: George Gutowski writes from a “Caveat Emptor Perspective“. I hold no positions in stocks mentioned in this post.
Image by lululemon athletica via Flickr
Lululemon Athletica Inc (LULU) announced blow out Q3 numbers. The stock popped to 52 week highs. The press release begs more questions than provides answers. Yes the increases are dramatic. The question becomes what do you do to sustain the growth. Very little information about the future was provided.
Currently Lululemon relies on their own stores. This is very capital-intensive. To continue growing they will need to make inroads with major retailers and set up either in store boutiques or become another offering. No real discussion of the issues. How do investors look into the future.
Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.