Q: Thanks for your answer the other day on this stock. I was hoping you may comment on the recent announced investigation by the competition bureaus or in your opinion is that kind of just noise that is already reflected in the share price? What could the result be and potential downside if the allegations prove to be true?
5i Research Answer:
Canada’s competition bureau is currently investigating LULU over the issue related to deceptive marketing practices of whether LULU is misleading consumers about its environmental impacts. We think this is largely noise with little implication for the company’s future prospects. As a shareholder, we would worry more about the competitive landscape, brand awareness and consumer demand for the products in the long term rather than short-term noise. Generally, if found at fault, companies in such cases pay a relatively non-material fine and carry on.