Can our nation's love affair with wearing athletic gear as everyday attire translate to a worldwide audience?
In an update today, JP Morgan analyst Brian Tunick said yoga and athletic apparel maker Lululemon (LULU) has a bright future–and that it involves going global. Big time.
Despite a disappointing Analyst Day back in April, Tunick chose to focus on the positive, noting that the company's upcoming stretch into a worldwide market could be a rewarding one. He writes:
With 5% of 2013 sales generated outside North America, Lululemon is underpenetrated versus its peers, which average 29% exposure. Over time, management sees international as a multi-billion dollar opportunity, with the potential for about 350 locations via an owned-store, joint venture, and franchise program. Using what we consider to be reasonable assumptions, the top-line contribution from international could start to accelerate – from a small 1% contribution in 2014 (versus our 12% top-line estimate) to 2% in 2018.
Also noteworthy to Tunick is the merger and acquisition action that has taken place among competitors in the sector lately. He writes:
With recent M&A in the yoga and athletic-wear space (such as Prana's acquisition by Columbia (COLM) and Lorna Jane now up for sale as per recent media reports), Lululemon’s geographical diversification efforts are timely given that the domestic competitive environment is certainly showing no signs of abating.
It's been a relatively quiet quarter for the former negative headline maker. Lululemon will report first quarter 2014 earnings on June 12. And, after last quarter's call to action by newly appointed CEO Laurent Potdevin, the relative calm has us wondering if Lululemon has at long last found its way.
Shares of Lululemon fell 0.5% to $43.27 today, while Columbia Sportswear gained 0.2% to $84.22.
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