The Cult of Lululemon Athletica Inc. (LULU)

A growing list of non-believers has suggested that Lululemon’s powerful brand has somehow “brainwashed” shoppers into buying $100 yoga pants.  Short sellers make up 25% of Lululemon’s share float, and they have a compelling argument as expectations are sky-high.  Any change in these expectations that resulted in lower earnings would send the share prices lower, and shorts would continue to pile on in CROX-like fashion.

So what will maintain and improve the brand’s perceived value for consumers?
Expanding into swimwear and men’s polo shirts will help introduce new markets.  But most importantly, the brand needs to stay relevant to its current affluent customer base.  While Lulu continues to improve their reputation among their core users and beyond, expect sales and higher share prices to follow.  But get out of the stock’s way once you notice those Groove Pants at 25% off.

The article The Cult of Lululemon originally appeared on Fool.com and is written by Spencer Houlihan.

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