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Lululemon Athletica(LULU - Get Report) fits the bill of a momentum stock right now. The $11 billion apparel name has rallied more than 58% so far in 2012, besting most large-cap names over the same period. LULU's core business is in yoga wear, a niche that the firm carved out at the same time that the exercise started ballooning in popularity.
Lululemon took advantage of that fortuitous timing to expand its offerings to include other fitness gear as well as menswear. Today, the Vancouver-based firm also boasts more than 190 retail stores spread across the U.S., Canada, Australia and New Zealand.
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Lululemon's success has everything to do with demographics. By entering the yoga wear business first, LULU targeted a market of generally affluent consumers who are willing to pay premium pricing for quality, and are viewed as trendsetters by others. That positioning has been a big part of the firm's success in arcing from yoga to more general athletic apparel; the sportswear business is a saturated, competitive market, but by starting in a successful niche, the brand was able to establish itself quickly.
To keep that pace going, the firm may want to consider invest in the sort of proprietary technology that bigger rivals hang their marketing campaigns on. After all, it's far too easy for
Nike(NKE) to churn out yoga pants. LULU needs more defensive product catalog.
In the meantime, the brand is having no problem sustaining itself, and the firm continues to earn hefty net profit margins. We're riding this stock's momentum this week.