Going Long LULU Headed Into Earnings
NEW YORK ( TheStreet) -- As I have noted in previous TheStreet articles, I am not much of a fan of piling into a stock, on the long or short side, ahead of earnings.
In this article, I discuss one more stock I might consider making moves on prior to earnings.
>>Also see : Why I Am Buying Intel Into Earnings and Beyond
I bought LULU because I believe it's a well-run company that will continue to grow at a rapid clip. CEO Christine Day has the factors brick-and-mortar retailers absolutely must have to not only remain relevant, but survive:
A high-quality exclusive brand not available anywhere else An affluent, very specific target customer willing to pay a premium for quality and social status The ability to control limited inventory by not discounting.
After Lululemon's recent analyst and investor conference, Wall Street continues to jump on board . A Jeffries' analyst referred to Lululemon as a "brand without constraints," led by "dreamers and doers." This comes as the company plans to expand its brand beyond yoga apparel into areas such as surf and beachwear. And, as Jim Cramer pointed out late last month on TheStreet, LULU's inventory "problem" is really not much of a problem at all. In addition to what I have already discussed, three other points make me even more bullish on LULU. Consider the following tidbits from the company's most recent annual report :
Our primary target customer is a sophisticated and educated woman who understands the importance of an active, healthy lifestyle. She is increasingly tasked with the dual responsibilities of career and family and is constantly challenged to balance her work, life and health. We believe she pursues exercise to achieve physical fitness and inner peace ...
Lululemon probably does not mention the other part of what really matters about its "target customer" because it's likely too presumptive for an SEC filing.
Take it from me. I live near some big money in Santa Monica, Calif. I cannot walk the half-block to the grocery store without seeing at least one LULU customer sporting a piece of clothing with the locally ubiquitous Lululemon logo on it. I took a spinning class last night, staring at LULU logos for the entire grueling 45 minutes. Anything to get through a workout. In any event, the people who not only regularly buy items from LULU, but have forged a connection with the brand are not the types of folks impacted by economic downturns. Lululemon lists this as a potential obstacle in the risk factors section of the same annual report because it has to. It's almost meaningless boilerplate.