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re: Lululemon drops $10.54 a share in one day despite beating estimates
Posted on 9/14/15 at 10:58 am to Mo Jeaux
Posted on 9/14/15 at 10:58 am to Mo Jeaux
quote:
Because they're not just a "yoga pants" labe
They are a yoga apparel with widespread alternative uses. They are a good company, that generally makes a high quality product and has appeal.
Lulu built a brand based on luxury status symbol. Being a publicly held company is pretty much a death sentence for them since investors love their home run growth stories. Growing into other markets would basically be signing up to be a firing squad target practice.
This is how the Michael Kors/Lulu etc stories work
1-Higher quality trendy product that appeals to upper middle class
2-Becomes status symbol based on quality & scarcity -> Everyone wants one
3-Company goes public based on growing brand
4-Investors drive up price based on previous growth + future growth projections
5-Required growth targets forces company to move into lower socioeconomic demographics
6-Company loses trendiness since everyone has product
7- Stock price drops like a rock
Lululemon cannot compete (at least at this point) with the logistical capabilities of Nike/UA/Addidas etc. So a drive for growth to lose their luxury symbol status would kill the brand
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