Growth investing 101: LULU
Growth investing is all about beating estimates (one could say that's all there is to investing). In retail, valuations are not measured as PE but in Same-Store-Sales (SSS) growth. Here's why:
http://www.fool.com/research/2000/foolsden000627.htm
Consider the recent SSS of these (one time growth) retailers:
WMT: 2.4%
TGT: 3.3%
SBUX: 6%
THI: 7.9%
LULU: 25% (latest Q results)
And today increased estimates to 35% SSS growth!
http://www.reuters.com/article/companyNewsAndPR/idUSWNAS642620071016
And the stock shot up 6.3%. Time is of the essence in growth investing; navel gazing is not recommended. You had to get in on WMT, SBUX, THI, and GAP when the SSS were high, not when the earning started materialising. That's too late.
Women will pay $100+ for pants that make their ass look good, and I am more than happy to profit from their vanity/insecurity :)
They have a big US and Intl expansion plans, and we know american women need as much help with their butts than ever before. So I feel this is one of the safer growth stories I've seen and I'm calling for a vote. Otherwise, I want to buy in my personal account.
posted by Junk Bonds @ 10/31/2007 10:41:00 PM
4 Comments:
Sorry Ed, I don't buy time is of the essence argument for growth stocks. There are many growth stocks that weren't necessarily recognized as growth right from the beginning. WMT and GAP had at least a decade of strong growth before leveling off. Their SSS didn't have one fabulous year and then tail off. You could have bought in at many junctures and still have a good return albeit not as good a ride as if you had been there right from the beginning. WMT TGT and Gap are a few retailers that have had longevity and that is a rare thing among retailers.
We digress here a little because I feel Lulu is more of a brand and must have fashion than it is a retailer. WMT and Target are different but successful retailers.
Lulu should be compared more to L.L.Bean or Cole Hahn or something like that.
Lastly, many women have told me that they won't wear Lulu because its not flattering unless you've got the ass of a model!
In terms of calling for a vote, I think the club needs to set some ground rules about when we invest new how do we go about setting a timeline on new investments? I guess this is an issue now because the club is just initiated and we do have capital to deploy. But in future, when we have cash from selling something, do we have to invest the money right away?
So let's set the ground work. I think:
1) Cash should be deployed in a timely manner, say 2months.
2) Proceeds of sales should be in deployed in the most profitable investment, including cash.
3) #1 takes priority over #2.
I hope that's clear, I need sleep. :)
Des, I'll try to address your concerns as repectfully as I can but I don't see how they are relevant investment factors.
1) "Many women won't wear LULU?" who cares??, they've demonstrated sales growth for over 10+ years. There are enough people who will buy it.
2) "You could have bought in at many junctures and still have a good return albeit not as good a ride as if you had been there right from the beginning." So in one sentence, you contradict your point.
3) I don't think LULU can be compared to LLBean or Cole Hahn.
http://www.fool.com/investing/high-growth/2007/09/11/you-go-yoga.aspx
I'd rather compare to SBUX since they are strong brand retailers, rather than mail order or luxury goods. I've never seen a yoga session at Cole Hahn store at 10pm. I gave SSS from different retailers to show that 35+% is astounding in this industry. Working with our clients, I know WMT, Loblaws, JCP, are fighting tooth and nail for 1-2% SSS growth.
It seems these counter-arguments are not really based on facts, but personal investing bias. That's fine, but at some point these discussions become unproductive, and we need to come to a decision. If we judge that this is not for the club then no probs, I'll move onto my next idea.
Frankly, I have other investing ideas to share, but I'm spending all my time defending this one.
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