Why P/E Ratios Are for Losers
Both companies target a relatively affluent consumer. LULU appears to trend higher end, but, without a doubt, both largely serve the upper middle-class and higher sets who make Chipotle meals a habit and drop $100 on yoga pants on a regular basis. In different ways, Chipotle and Lululemon build brand loyalty with their core groups.
For Chipotle customers, the perception that they can get a quick, high-quality meal keeps them coming back. Here's how the company frames itself in its most recent annual report:
Our vision is to change the way people think about and eat fast food. We do this by avoiding a formulaic approach when creating our restaurant experience, looking to fine-dining restaurants for inspiration. We use high-quality raw ingredients, classic cooking methods and a distinctive interior design and have friendly people to take care of each customer--features that are more frequently found in the world of fine dining. Our approach is also guided by our belief in an idea we call "Food With Integrity". Our objective is to find the highest quality ingredients we can--ingredients that are grown or raised with respect for the environment, animals and people who grow or raise the food.
Chipotle talks the talk. You simply do not plop a national burrito chain down in affluent burrito-loving cities like San Francisco (Chipotle has six locations there and one in Berkeley, as of this writing) without appealing to the population's sensibilities.
Lululemon does more than provide convenience and a healthy image. Like Apple (AAPL), it becomes part of its customers' lifestyles. LULU builds an intimate connection that the company provides color on in its 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.
As women have continued to embrace a variety of fitness and athletic activities, including yoga, we believe other athletic apparel companies are not effectively addressing their unique style, fit and performance needs ...
We coach our store sales associates, whom we refer to as "educators," to develop a personal connection with each guest.