Q: I was in a Lululemon store in Tokyo (Roppongi neighbourhood) last month. It was a smaller store but very busy and the staff were great...
I have a full position in SHOP. This stock is more expensive than LULU but the growth is also much higher.
Could you compare the growth and opportunity potential for these two consumer companies both short and long term.
As of today and from a strictly growth perspective would you overweight one over the other?
I have a full position in SHOP. This stock is more expensive than LULU but the growth is also much higher.
Could you compare the growth and opportunity potential for these two consumer companies both short and long term.
As of today and from a strictly growth perspective would you overweight one over the other?
5i Research Answer:
These are two companies that operate in completely different industries, comparing them of course is difficult. SHOP is not really a consumer company, but rather a software business. Based on the consensus estimate, SHOP is expected to grow its topline by 20% organically over the next few years, SHOP is trading at 9.4x Forward P/Sales. On the other hand, LULU is trading at 19.5x Forward P/E, and sales could grow by 11% on average over the next few years. We like both names, both companies are trading at the lower end of valuations compared to historical averages in years, we don’t think there is any overlap between the two businesses and would be comfortable owning both. LULU has struggled, but it has always recovered in the past.