Technical Analysis on Lululemon and Under Armour: Sportswear Stocks Trading at High Multiples
LONDON, January 30, 2013 /PRNewswire/ --
The specialist apparel industry is in the growth phase and is likely to touch the $125 billion mark by 2017. The space has many key players including Lululemon Athletica Inc. (NASDAQ: LULU), which sells premium priced Yoga and fitness apparels, Nike and Columbia Sportswear. While Lululemon Athletica caters to the upper segment of the market, Under Armour Inc. (NYSE: UA) sells its products to more value-conscious buyers through its collaboration with outlets like Foot Locker and Dick's Sporting Goods. The industry is expected to benefit from the improving economy, giving consumers a little extra to spend on discretionary products. StockCall has compiled a thorough technical analysis on two companies on the apparel space. The free reports on Lululemon Athletica and Under Armour are accessible upon registration at
Lululemon Athletica raised its guidance for the fiscal fourth quarter of the year. The company now looks to report its revenue at the top end of its previously announced range of $475 to $480 million. It also enhanced its EPS estimates to 74 cents per share, up from 71 to 73 cents it had projected earlier. The stock, however, tumbled down on the news. Lululemon Athletica currently trades at Price Earnings multiple of more than 43, which makes it a rather expensive stock. Since the stock seems to be fully priced, the upside potential is capped. Download the free technical analysis report for Lululemon Athletica by signing up now at
Lululemon Athletica also faces growing competition. It sells through its own stores and currently has 211 stores globally. It is also planning to expand its online sales operations as e-commerce becomes the norm of the day. Lululemon Athletica also has one of the highest profit margins among its peers at about 20 percent. Premium pricing is the company's USP and its management categorically states that it has no plans to go the discount route. The unique positioning sets it apart from its wholesale-relying rivals like Under Armour Inc. [Free Technical Report on UA](1).
Lululemon Athletica is expected to pay more attention to its online sales and its growth in international markets in Europe and Asia.
Under Armour - Another Top Player in the Sportswear Industry
Under Armour's stock grew about 25 percent last year and has been a little under pressure this year. Like Lululemon, Under Armour's stock also trades at a high multiple of 46 and seems to be fairly, if not overly valued. The company is likely to focus its attention on the stagnating footwear division, which is currently lagging behind competitors like Nike. Under Armour also plans to augment its international operations as it derives a miniscule 6 percent of its revenue from the markets outside North America. Thus, the company has good growth potential in the overseas market.
Under Armour is set to announce its quarterly earnings on January 31st. The company grew its revenue by 20 percent in the past three quarters. However, the growth trend is already priced in the stock. Currently, Under Armour trades 20 percent lower than its 52-week high but it still sports lofty valuation. Also revenue growth momentum seems difficult to sustain. The company itself reported that it expects its 2013 revenue to be closer to the lower end of its long-term growth target.
Under Armour may seek to grow through international expansion, but since the company retails its products via partners, its international expansion plans are going to be much more difficult to execute.