Q: I currently have a full position in LULU and am currently around break even. I am a bit nervous about LULU and your most recent comments have been a bit ambivalent. I'm thinking of switching to either CROX ( low PE which is uncommon these days, it seems) and ULTA ( the Buffett blessing). I like LULU and my wife (yoga instructor) has many LULU pieces as do all of her friends. So brand loyalty is strong, at least from one data point but what about the next five years? Stay or go? Thanks
5i Research Answer:
LULU management has stick-handled prior problems quite well in the past, and with strong cash flow and some recent positiv momentum, as well as its new 'cheap' valuation we think the recovery potential remains very good here. It may take some time but we note it has grown EPS every single year in the past decade (except a small dip in 2021 covid days and flat earnings in 2015). Fundamentals are good, it just needs to get its growth mojo back. We would not consider it a SELL today. Of the three stocks, we would probably rank it slightly ahead of ULTA today and behind CROX.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in ULTA, CROX.