Why is Lululemon Stock so Expensive?

There are too many yoga pants in the market.

Andrew Willis 14 October, 2022 | 4:38AM
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Andrew Willis: Times have been challenging for physical retailers these past few years, and that includes clothing stores, with many companies large and small going bankrupt or being forced to close locations. But not Lululemon (LULU), where sales have been increasing and new stores opening.

And investors are buying it… But we caution that competitors are selling it. Equity analyst David Swartz notes that Gap’s Athleta, for example, sells women’s leggings of a similar quality these days and that Lululemon will need to introduce new fabrics and technology to hold its popularity in the critical category.

We do see Lululemon maintaining premium pricing thanks to brand popularity, which contributes to a narrow moat. And there are great growth opportunities abroad, potentially making up a quarter of total sales around the end of the decade, assuming yoga pants are popular overseas as well.

From Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Lululemon Athletica Inc334.95 USD-0.98Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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