This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

LULU Pulls an Apple, Market Overreacts

NEW YORK (TheStreet) -- As the underrated pop band The Gin Blossoms says, If you don't expect too much from me, you might not be let down.

As a human who makes his way through this complex thing called life, I have taken those sage words on as one of my mottos. If I ran things at a public company, I would probably get it framed as the caption to a photo of an NHL goaltender about to make (or not make) a difficult save.

You can finish off the story in that photo however you like, but, whatever you do, keep an even keel. In life, in business and in the stock market, peaks and valleys are about all you can count on.

In the aftermath of Lululemon's (LULU) rather weak earnings report, TheStreet contributor Brian Sozzi offered Barron's some bearish, but clearheaded reaction, noted in this excerpt from the article:

"Lululemon is facing an uphill battle expanding beyond core yoga gear (think running), entering the competitive waters dominated by Nike (NKE) and Under Armour (UA), both of which have stronger brand equity and better prices," he wrote in a note this morning. "There is only so much a company could raise prices before the consumer is turned off, and I think that is happening at Lululemon (I continue to see price increases on 'basics')."

I follow Sozzi on Twitter, read him on TheStreet and always get a lot out of his analysis.

That said, I diverge from Sozzi and other LULU bears on several points, particularly the one that, by intuitive default, puts Lululemon in competition with Nike (NKE) and Under Armour (UA). That's akin to telling Morton's that it competes with Outback Steakhouse.

Just as Morton's and Outback both make things you can eat, Lululemon, Nike and Under Armour each make things you can wear.

We can probably all agree that Morton's and Outback target a completely different clientele. Most people could probably achieve consensus on two other important distinctions between the two chains: One, Morton's serves higher quality (and more expensive) food; and, two, Morton's focuses on a small core offering whereas Outback tends to be, relatively speaking, all over the map.

By a similar token, Nike and, to a lesser extent, Under Armour are both all over the board. That's not necessarily a bad thing, as I admire and am generally bullish on both companies, but it does put them in a different league than Lululemon. Not a better or worse league, just a different one.

Lululemon is not, nor will it ever be, everything to everybody. Sure, it's expanding its line, but it's doing it in a much more focused way than Nike and Under Armour.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,960.57 -123.23 -0.72%
S&P 500 1,978.34 -9.64 -0.48%
NASDAQ 4,449.5640 -22.5440 -0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs