Lululemon Athletica inc. (LULU): Is this Stock a Downward Dog?

Around this time of year, gyms all around the globe are packed with passionate individuals bent on keeping the top New Year’s resolutions of losing weight and getting in shape.

Gym rats shudder at the increased club traffic, parking problems, and lack of gym etiquette. But among those who enjoy the robust enthusiasm from these eager beavers are retailers who cater to these fervent guys and gals who clamor for the latest items to help them in their quest to slim down and shape up.

Looking around my gym I have noticed members looking a lot spiffier. Gone are the ripped, baggy sweats, faded T-shirts that pay homage to old rock bands and the basic and boring gray and black. These have been replaced with “matching outfits” in bright hues that are blushingly form fitting and eye-catching on many. People now aren’t just trading workout tips; they are also sharing workout style tips. And since its long been know that the gym is a great pick-up place, looking good while working out is a top priority for many.

Ask the most stylish of the bunch where they got thier cute running top, chi-chi shorts, or fabulous yoga pants, and these fashionisats are apt to tell you they got their workout outfit from Lululemon Athletica inc. (NASDAQ:LULU) .  This upscale retailer of yoga and active gear has garnered a loyal following of mostly high-income, trendy women who are seemingly not affected by pricey prices or an economic downturn, evident during 2008 when Lululemon enjoyed strong sales growth despite an anemic economy.

The Canadian company has also reaped rewards from branching out since its inception in 1998, adding men’s wear, stores, and an online site. Lululemon also added a cache of in-vogue accessories. Female customers take delight in carrying around the store’s signature bags purchases come in.

The company went public July 26, 2007, in an offering of 18.2 million shares priced at $18 a share, well above the expected price range of $10 to $12 a share. Since then shares have soared, gaining more than 400%, hitting a high of $81.06. But over the last several weeks, Lululemon stock looks a lot like a lemon, down nearly 15% from its peak, and now trades closer to its 52-week low rather than its high.

The lunge, or plunge, has many questioning if shares are a “Buy,” or if investors should just say bye bye. Sporting a P/E of 42.09, shares look cheaper than a lot of its expensive store offerings, but the ratio is high, and compared to competitors, Lululemon’s stock looks questionably lofty.