Can Lululemon keep its cult following?
Investors who wish to remain in Lululemon Athletica inc. (NASDAQ:LULU) should be confident that the company can maintain its image. To remain successful, Lululemon must continue to convince consumers to fork over $98 for a pair of yoga pants. For customers to pay that price, they must remain confident that they are receiving the highest quality of clothing.
On the other hand, the sell-off might make Lululemon shares a bargain at current levels. Although the PE ratio is high, it is still much lower than Under Armour Inc (NYSE:UA)’s 42 and only a bit higher than NIke’s 27. In addition, the scandal over the yoga pants has caused a great deal of free advertising — both in the press and on social media.
Ultimately, investors must decide if they believe the company can maintain its cult following. If it can’t, Nike and Under Armour — both of which are increasingly targeting women — could be better buys.
The article Should Investors Trade in Their Lululemon for Competing Stocks? originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
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