Seeing Through Lululemon Athletica inc. (LULU)’s Excuses: Limited Brands, Inc. (LTD), The Gap Inc. (GPS)

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According to their earnings report on March 21 for full year and Q4 2012 this Luon pants recall will hit the bottom line for $57-67 million. To be fair, gross profit and net revenues increased 31% in the quarter compared to the year ago period. Diluted EPS increased from $0.51 to $0.75 from a year before. Cash (and cash equivalents) rose from $409.4 million to $590.2 million.

Pants profits elsewhere

As mentioned before there are yoga pant and athletic wear alternatives and two are preferable to Nike and Under Armour because their yoga pants are less stylish and feminine. (Also, Under Armour has no yield and its P/E at 41.82 is now higher than Lululemon.) Those two are The Gap Inc. (NYSE:GPS) with its Athleta line of athletic apparel and Limited Brands, Inc. (NYSE:LTD) whose Victoria’s Secret Pink yoga pants were being snapped up even pre-I see London, I see France controversy.

Consider Limited Brands, Inc. (NYSE:LTD) with its 2.80% yield and 17.37% P/E and a 1.29 PEG. I stopped into Victoria’s Secret on a Saturday afternoon and it was packed, with four registers all busy. The overwhelming majority of shoppers there were under 30 when I peeked in. Its PINK line aimed at college-age women and younger has helped pump up earnings 17% in the last quarter.

Limited Brands, Inc. (NYSE:LTD) which owns high end Henri Bendel, Bath and Body Works, La Senza, C.O. Bigelow, and White Barn Candle Company is off some 15% from its 52 week high. Limited Brands is a more global company than Lululemon Athletica inc. (NASDAQ:LULU)(only in New Zealand, Australia, Canada, and the US) with Limited Brands, Inc. (NYSE:LTD) stores in the Middle East and Europe as well as Canada and the US. Limited paid $1.44 billion to shareholders in 2012 and repurchased $625 million worth of shares.

The Gap Inc. (NYSE:GPS) is the largest of these with 3,300 stores in 90 countries. It has a 15.30 P/E and a 1.70% yield. Its Athleta brand is one of five main brands including Gap, Old Navy, Banana Republic, and Piperlime.

The Gap Inc. (NYSE:GPS) is closer to its 52 week high, up 34.77%. Analysts expect a 9.47% five year EPS growth rate for Gap, less than half that of Lululemon. The Luon pants shortage will likely be a minimal catalyst for The Gap Inc. (NYSE:GPS).

Let’s sew it up

I prefer Limited Brands, Inc. (NYSE:LTD) to The Gap Inc. (NYSE:GPS) for upside, yield, and the increasing following for PINK. With Lululemon Athletica inc. (NASDAQ:LULU) there was so much to love: its community outreach, its growth, and the fervor shown by its customers. As their manifesto said, “Friends are more important than money.” Friends don’t sell see-through pants and then ask you to bend over.

The article Seeing Through Lululemon’s Excuses originally appeared on Fool.com.

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