‘See-Through’ Pants Will Wallop Lululemon Athletica Inc. (LULU)’s Bottom Line

The latest setback underscores the company’s warning in its March 2012 annual report. The company cautioned it is exposed to risks from its heavy reliance on a limited number of suppliers.

While Lululemon Athletica Inc. (NASDAQ:LULU) has branched out to carry other items like running gear, menswear and accessories, its offerings pale to those of rivals.

That makes rival Nike, Inc. (NYSE:NKE) a safer sector bet. The Oregon-based behemoth sells a bevy of items for a variety of sports, as well as casual wear. Its iconic “swoosh” brand still carries clout. Nike’s highly recognizable logo is coveted among men, women and teens.

Nike recently reported orders through April 2013 (future orders) were up 14% in North America, Nike’s most mature market. Worldwide demand also remains robust. Every season brings customers to Nike. March Madness, spring track, baseball, swimming, etc. etc.

Under Armour Inc (NYSE:UA), another relative newcomer in the sports apparel market, has enjoyed an annual growth rate of 34% since 2005. But that kind of explosive growth raises a red flag for some. Those growing pains can cause an over-inflated stock price. Trading at a P/E of more than 40, UA shares don’t look cheap. The stock is trading close to a 52-week low, so shares are worth watching. Just right now, prudent investors might be better off watching from the sidelines.

As for Lululemon Athletica Inc. (NASDAQ:LULU), even a devout yogi who looks for the good in all things can see the see-through pants and downward predictions spell trouble that no form of meditation can alleviate.

The article ‘See-Through’ Pants Will Wallop Lululemon’s Bottom Line originally appeared on Fool.com.

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