Lululemon Athletica (LULU) Stock Slipping After Filing for Founder Chip Wilson to Sell His Stake

NEW YORK (TheStreet) -- Shares of Lululemon Athletica Inc  (LULU) are slipping, down 3.7% to $64.30 in pre-market trading Thursday, after the company filed for founder Chip Wilson to sell his entire stake in the yoga wear maker, according to The Wall Street Journal.

Wilson and his family may sell their entire 20.1 million shares, which is a 14% stake in the company worth about $1.2 billion, the Journal added.

Wilson and Lululemon had been at odds for more than a year over his involvement in a casual clothing chain, Kit & Ace. Kit & Ace, which resembles Lululemon, was launched by Wilson's wife and son, the Journal noted.

Canada-based Lululemon Athletica offers a range of yoga-inspired performance apparel and accessories for women, men and female youth such as fitness pants, shorts, tops and jackets, which are designed for healthy lifestyle activities.

Separately, TheStreet Ratings team rates LULULEMON ATHLETICA INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate LULULEMON ATHLETICA INC (LULU) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, increase in net income and solid stock price performance. We feel its strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LULU's revenue growth has slightly outpaced the industry average of 9.4%. Since the same quarter one year prior, revenues rose by 10.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.66, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Textiles, Apparel & Luxury Goods industry and the overall market, LULULEMON ATHLETICA INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Textiles, Apparel & Luxury Goods industry. The net income increased by 151.9% when compared to the same quarter one year prior, rising from $18.98 million to $47.81 million.
  • Powered by its strong earnings growth of 161.53% and other important driving factors, this stock has surged by 51.74% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: LULU Ratings Report

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