Hi HODLers, Hiveans and Lions,
As I am navigating the recent uncertainties in the economy, stock and crypto markets; I was trying to find some stocks I could short based on the recent US Consumer mood.
I felt that Lululemon was the typical company which would be impacted. It was innovative, still is but a bunch of competitors have kind of caught up to it and offer similar products.
It is targeting the affluent Americans and recent research shows that the US Consumer which adapts its spending based on its mood or personal situation is basically 20/25% of the US.
Let me explain my thought process:
- The top 5% will spend, recession or not
- The bottom 50% has barely enough to live comfortably and therefore just spend 90%+ of their income
- The <5% to 25% are the ones who adapt their spending depending on their future prospects
The latter is the main delta of the US Consumer Sector. And it is feeling the pain right now. These are the typical customers of the Lululemon brand. This is why I wanted to maybe short the stock or at least pay attention to this company's results.
Results are in below and they confirm what I believed. the Middle Class ++ is spending less. At Lululemon at least...
Lululemon $LULU Q4 Results (from Factset)
Total Comps(reported) +3% vs StreetAccount +5.1%
- 4% (constant $)
- Americas (reported) 0%
- Total International (reported) +20%
China Mainland (reported) +26%
RoW (reported) +14%
RoW (constant $) +17% - Gross margin 60.4 vs SA 59.7% and year-ago 59.4%
- SG&A 31.5% vs SA 31.7% and year-ago 30.9%
- Operating margin 28.9% vs SA 28.0% and year-ago 28.5%
- Inventory $1.44B, +9% y/y
- Sales $3.61B, +12.7% y/y
Anyone bought LuluLemon pants lately?
Stay safe out there,