Lululemon Assumes The Downward Dog

Some people have been bullish on yoga apparel maker Lululemon for some time. Only now other people are noticing too.

Yahoo!: Lululemon shares fall back to earth after much-hyped initial public offering

VANCOUVER - After starting off like a rocket, shares of yoga-wear retailer Lululemon Athletica Inc. (TSX:LLL) have returned to earth in recent weeks trading near where the stock was in the days after its much-hyped initial public offering.
And this week, the market will be watching carefully as the lock up period for Lululemon's investors expires on Jan. 23 following company's initial public offering in July and the number of shares eligible to trade is set to grow significantly.

For a small player, trying to short the hysteria wouldn't have been a sound move. As John Maynard Keynes said, “The market can stay irrational longer than you can stay solvent.” Regardless, the position of saying out loud "They're just yoga pants, for chrissakes. a 300 P/E is retarded!" has paid a huge return of smug self-satisfaction.

No one should be surprised to see insiders sell this week, since Lululemon's IPO was a payout for the original principals plain and simple, and there's nothing wrong with that per se. Everyone's gotta get paid. Just don't expect that yoga pants are going to be the second coming of Google.

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Feds drop the hammer on Lululemon, hilarity ensues

Overpriced Hip, trendy, athletic apparel maker Lululemon, who earlier today declared "Um, we conducted our own tests, that's it, yeah! And, um, our seaweed clothing tested as having everything we said they contained. Yeah, that's the ticket!" has now been forced to change their story, as a result of their healthful claims for the VitaSea clothing line coming to the attention of the Federal Government.

Yahoo!: Lululemon to remove healthful claims from seaweed products in Canada

Lululemon Athletica Inc. (TSX:LLL) has agreed to remove all claims alleging healthful benefits from its VitaSea line of clothing products which contain seaweed, Canada's Competition Bureau says.
In a statement late Friday, the regulatory agency said the Vancouver-based yoga wear retailer has agreed to immediately remove all tags and other product notices that contain "unsubstantiated" claims of therapeutic or performance benefits from its seaweed line of clothing in its nearly 40 retail stores across Canada.
Citing the Textile Labelling Act, the bureau said it is illegal to make any false or misleadingrepresentations relating to a garment, including representations regarding fibrecontent.
As well, the bureau cites the Competition Act which says all performance claims must be based on "adequate and proper testing" prior to making claims to the public.

You've got to admire their moxie when it comes to keeping a straight face while making outrageous claims about their products to their clientele, but once the Feds politely point out that they're breaking the law, suddenly they're good corporate citizens again.

You can't make this stuff up!

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Lululemon conducts it's own tests, denies everything

Yahoo!: Lululemon says tests confirm seaweed content in clothes

Lululemon said late on Thursday that lab tests conducted Wednesday night in Hong Kong confirm June test results showing the fabric contains fibers that match content labels on the clothes.
The seaweed fiber releases amino acids, minerals and vitamins into the skin on contact with moisture, Lululemon says.
The Vancouver, British Columbia-based company said SGS SA , a testing and certification group based in Switzerland, runs tests on all its fabrics before each season.

Well, there you have it. Lululemon said their own tests found seaweed. Who are we to doubt them?

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More Haterade for Lululemon

Or fuel for the fire. You know, whatever.

Timing and Delivery: Lululemon Seaweed

Seaweed or not, I went over a bit of the background on Lululemon after it went public in the summer and talked about some of the great customer service experiences I (and others I know) have had, particularly here in Vancouver, its home market. I still think it’s a great product, but this latest story may cast a negative shadow over their marketing tactics and trust in the eyes of the consumer.

Blogging Stocks: Is it too late to short seaweed-free clothing vendor Lululemon Athletica?

I am not sure whether this news will wipe out the company, but it could be in trouble for false advertising. One customer outside a Lululemon store in Chicago said he would not stop buying VitaSea clothing, even if tests disproved Lululemon's claims. "I couldn't care less, because it is so comfortable."

I seriously doubt that this foofrah will either tank Lululemon's stock down to less stratospheric levels (come on, a P/E of 269!?), or dissuade many of the Lulu-clad fashionistas who've been drinking the Kool-Aid, but it is a corporate embarassment, and might even be the tip of the iceberg, with regard to their product claims.

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Lululemon out to sea on product claims

NYT: ‘Seaweed’ Clothing Has None, Tests Show

One of [Lululemon's] lines is called VitaSea, and the company says it is made with seaweed. The fabric, according to product tags, “releases marine amino acids, minerals and vitamins into the skin upon contact with moisture.” Lululemon, which has received positive media coverage for its fabrics, also says the VitaSea clothing, made from seaweed fiber supplied by a company called SeaCell, reduces stress and provides anti-inflammatory, antibacterial, hydrating and detoxifying benefits.
There is one problem with its VitaSea claims, however. Some of them may not be true.
The New York Times commissioned a laboratory test of a Lululemon shirt made of VitaSea, and reviewed a similar test performed at another lab, and both came to the same conclusion: there was no significant difference in mineral levels between the VitaSea fabric and cotton T-shirts.
In other words, the labs found no evidence of seaweed in the Lululemon clothing.

Even better than that is the wide-eyed blundering response from Lululemon when confronted with the issue:

Lululemon executives said that they had not independently tested the VitaSea material to see whether it lived up to the claims on Lululemon’s tags. Instead, it trusted the claims of its suppliers, executives said.
Mr. Wilson added that the company probably did not have enough money to test the material back when it started using it 18 months ago. When asked about Lululemon’s product tags and the claims about vitamins and minerals, he said, “That’s coming from the manufacturer. If you feel the fabric, it feels a lot different.”
Analysts said it is the responsibility of the companies to test all of their products.

When in doubt, deny, blame, and lay responsibility on someone else. So much for being a different, progressive kind of company. Then again, we saw hints of Lululemon's ostrich-like abilities during their minor child labor foofrah a couple of years ago.



*hat tip to Dealbreaker's Opening Bell for the link to the story.

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Speaking of IPOs. Lululemon is off and running

The controversial IPO for yoga retailer Lululemon launched last week, to great hullabaloo.

Reuters: Lululemon stock jumps 50 pct in eagerly awaited IPO

Here's their chart

So far it's been a field day for the issue's originators, and the prime brokers who snarfed up the issue, and who then found an eager crop of retail investors to flip the units to. Let's see, the market cap is now, what, only 297 times their net profit? That's pretty dot-comical for a garment maker.

This is getting better and better.

Watch this space.

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Lululemon IPO goes live

And amazingly, not everybody is sunny and bright about it.

Canadian Business retail correspondent Zena Olijnyk raises some doubts about Lululemon's long-term value as an investment.

Yahoo!: Got a yen for zen?
But not so fast, I say. Look a little closer and you might want to be careful: this is one public offering that has the potential, for the retail investor, at least, to turn into something resembling a downward-facing dog
...
As a result, the valuations on this IPO should give pause for consideration. Using US$11 a share, the midpoint in the expected pricing range, the stock is valued at more than 30 times operating profit, once you back out one-time costs. For a firm with US$150 million in yearly sales, the US$800-million market cap this price implies is astronomical. (Following the IPO, there would be about 75 million shares outstanding.)

Ms. Olijnyk is, of course, not the first person to point out that this IPO doesn't exactly seem like mana from the gods. I was making rude noises about this back in May.

Lululemon Public Offering Drawing Interest And Ire

Judging by the results of Google Analytics, there are lots of people curious about Yoga Lifestyle retailer Lululemon's pending Initial Public Offering. Conversely, I recieved a fair number of rude comments from my correspondents about the IPO. The best one by far was:

Wow. Chip and co. have blatantly called the market top for hundred dollar yoga pants. Now that the cow is thoroughly milked, it's time to cash out and find a bigger fool to buy the brand. Apparel trends surf a wave, and this one is due to crest.

So there you go. I feel so validated.



Added bonus: Lululemon, the story so far

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Key search terms for June

Okay, I'm a little late. I blame the Canada Day long weekend.

Without further ado, and for no one's edification but my own, here's the search terms that brought people here in the month of June:

The number one search term was "Compusmart closing," with 27% of the total. In fact, if as many people who searched for the story about Compusmart's store closings actually shopped there, they wouldn't have gotten into trouble in the first place.

In a close second (22%), Oakley's sale to Luxxotica garnered a lot of interest.

Lululemon's impending IPO (shouldn't that have happened by now?) showed strong interest for the third straight month (15%).

My personal favorites are, as always, the wild cards. The "what the hell is this person looking for?" category:

vole problem Calgary
vole exterminators Apparently it's worse than I thought.

Tweeter stops severance to employees. I hadn't heard this elsewhere and failed to corroborate it, but it makes a good story, doesn't it?

distad pain tool I have no idea what they were looking for, but if I start a heavy metal band, this will be our name.

For great t-shirts, check out the fine folks at Dirty Microbe, from whom I stole borrowed the above illustration.

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Lululemon Public Offering Drawing Interest And Ire

Judging by the results of Google Analytics, there are lots of people curious about Yoga Lifestyle retailer Lululemon's pending Initial Public Offering. Conversely, I recieved a fair number of rude comments from my correspondents about the IPO. The best one by far was:

Wow. Chip and co. have blatantly called the market top for hundred dollar yoga pants. Now that the cow is thoroughly milked, it's time to cash out and find a bigger fool to buy the brand. Apparel trends surf a wave, and this one is due to crest.

Mixed metaphors aside, that correspondent is not alone in murmuring discontent about the prospects of a small Canadian retailer fuelling agressive expansion through public equity.

And just how much expansion will it buy exactly? From the Globe and Mail's Streetwise Blog:

Globe and Mail.com: Lululemon stock sale a downward dog for Canadian dealers

Very little of the money raised from the stock sale will go towards building the chain, with just $25-million earmarked for the company. The rest of the stock is being sold by the company’s current owners, who include Mr. Wilson and two private equity funds, Advent International and Highland Capital, both based in Boston.

So, if it looks like a payday, and sounds like a payday, would you mistake it for a business plan?

*The content contained in this blog represents the opinions of Mr. Distad. This commentary may contain forward looking statements. This commentary in no way constitutes a solicitation of business or investment advice. If you're looking for stock picks from me, look somewhere else. Really, what were you thinking? This blog is intended solely for the entertainment of the reader, and the author, and not neccessarily in that order.

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Lululemon Going Public

Most awkward headline of the week:

Yahoo!: Canadian yoga clothier goes from Zen to Nasdaq*

OTTAWA (AFP) - Yoga clothing retailer Lululemon hopes to raise 200 million dollars in an initial public offering to finance a massive expansion, the company said Tuesday in securities documents.
The Vancouver-based company filed a preliminary prospectus with the US Securities and Exchange Commission outlining plans to list its stock on Nasdaq and Toronto exchanges and use the funds to double the number of its stores.
The company was founded in 1998 at the onset of a swelling North American yoga craze.
As of April, it had 52 stores in Canada, the United States, Australia and Japan selling women's athletic apparel, but plans to open an additional 50 to 60 stores in Canada and the United States by the end of 2008.
"The market for technical athletic apparel is highly competitive, the company said in securities filings.
"Many of our competitors are large apparel and sporting goods companies with strong worldwide brand recognition, such as Nike, Inc. and Adidas AG, which includes the Adidas and Reebok brands."
Indeed, the ancient Indian discipline whose aim is to join mind, body and soul generates about l8 billion dollars annually for moguls such as Los Angeles superstar yoga teacher Bikram Choudhury and his more than 750 franchised studios worldwide leading the way.
Rob Wrubel and George Lichter, who founded and sold the search engine Ask Jeeves, are opening studios called Yoga Works.
And the word itself is used to promote everything from vodka to chakra panties.
Last year, Lululemon reported earnings of 7.7 million dollars and 148.9 million dollars in revenues, growing almost 91.1 percent annually since 2004.

What's odd here is seeing a small retailer/apparel manufacturer go public, rather than seek a buyout by one of the aforementioned apparel giants like Nike, Adidas, et al. $200 million is a snack for the big players in athletic apparel. So the question is, is the public offering in the works due to lack of corporate interest, or a prelude, looking to boost revenue and income through expansion, and then shop for a buyout?






*what does that even mean?

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