Lululemon Stock: Strong Holiday Results, But Can it Continue

Chris Hill: Lululemon Athletica
shares up 8% this morning. Lululemon raised
guidance for the full fiscal year. This is a nice boost for
the raise in the guidance. I think it’s safe to assume that
they had a good holiday quarter. Dan Kline: This shocked me. They had reported in early December,
and the numbers were a little soft. This is a premium product.
It’s not really in line with who did well. Target, Walmart,
those had good holiday seasons. If you walk into Target, there’s a huge
display of, they don’t call it fake Lululemon, but Lalalarry or whatever their
fake brand is. So, this shows a real strength. The economy is pretty good,
and people are willing to buy $70 yoga pants. Hill: I was less surprised, but that’s
because I have young women in my house. In terms of what was on various Christmas
wish lists and that sort of thing — and, there’s a Lululemon right here in Old Town, and
over break, there was an excursion, all that sort of thing. Are you at all surprised — not necessarily
just by this, because I know you’re surprised by this. There was a stretch of time where the success
of Lululemon was talked about first with praise, then followed by, “But I don’t see how they
keep this up. How big is the market $100 yoga pants?” And the track record of Lululemon
over the past 10 years is pretty impressive. Kline: I think they’ve moved beyond the trendy
— remember Vineyard Vines, everybody had to have that shirt of the high school kids?
They still have a little bit of that. They haven’t fallen into the negative. Sometimes you get
that backlash, where it becomes really not cool. That didn’t happen, and that’s
because it’s a quality product. I don’t look like it, but I’ve done hundreds
of yoga classes over the last few years. If someone is wearing
cheap yoga pants, that’s not great. For the actual yoga market,
Lululemon is a really good product. I’m sure there are less pricey — maybe Target’s,
maybe Amazon’s — but you don’t know. And if it’s the difference between your yoga
pants being see-through or not, you might spend the extra money. So, they’ve established that this brand is
good, and I think that will transcend the up-and-down trendiness of the label. Hill: And, they’ve also done a good job
of expanding the offerings for men. When they initially talked about,
“This is going to be a focus for us,” I was one of those people saying, “Come on, really?”
And it goes to what you said, they make quality stuff. Kline: I laughed because as a man who does yoga,
it’s very challenging to figure out what wear. You can’t really wear sweatpants.
You’ll see guys show up in slacks. Nobody knows what to do. So, to be able to buy a quality pant,
where you’re not wearing a woman’s outfit, you’re wearing something made
for men, they’ve really figured it out. They’re answering a question that maybe the
rest of the market didn’t believe was being asked, but every guy in a yoga studio was asking.