Lululemon Athletica (LULU:NASDAQ)

Price: $371

Gain to date: 42.7%

We recommended investors slip into Canadian athleisure-wear company Lululemon Athletica (LULU:NASDAQ) in August 2024 after the shares had almost halved in value due to concerns over US consumer spending.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

We might have missed the absolute low, but as it turned out our contrarian call was still fairy well-timed as we caught the sizeable snap-back with the shares hitting $400 this month against our ‘in’ price of $270 per share.

With US retailers showing mixed fortunes over the key festive selling period, we read that inventories rose in 2024 and are expected to keep rising in 2025, while rivals continue to open new stores in close proximity to gain brand awareness.

Also, while we certainly aren’t fashionistas, the firm’s latest marketing campaign – which includes large brand lettering – feels like a mistake.

Most of the latest collection – including the Lunar New Year range in striking red, ideal for the Chinese market – is fairly classy, as it should be at such an elevated price, but we can’t see customers paying $120 for a pair of ‘high-rise’ leggings with the firm’s name splashed all over them.

WHAT SHOULD INVESTORS DO NOW?

As analysts at Jefferies point out, looking at Gap and Under Armour’s past failures, the large and loud logo is exactly the opposite of what consumers covet and another reason the competition is likely to take market share.

We didn’t pick the absolute low in the shares, nor have we picked the high for the time being, so we may be forgoing an even bigger return, but it feels as though we have had a good run and as the old saw goes you can’t lose money taking profits. 

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