Lululemon athletica inc. (LULU)

Hugerat (< 20) Submitted: 4/10/08 10:54 PM : Start Price: $32.34 LULU Score: 4.88

Currently trading at more than 8 times sales, nevermind the PE, and that's after a precipitous drop. By comparison, Under Armour, another pretty hot retailer is trading at just around 3X sales and half the PE. True, LULU is popular now, but they operate in a relative niche market, and it wouldn't take much of a misstep for their customers to defect to the next hot brand.





Something with this business just smells fishy too. And I mean the stank three-day old kind of fish. Nearly 80% of the proceeds of the IPO went to line the pockets of management and the VCs rather than going back into the business. That leaves either debt or cash flow to fund future growth. Oh yeah, they are trading at 60x cash flow, so I guess debt. The VCs recently dumped their shares, their former CEO was found to have lied about his resume, and they have blatantly lied about certain materials and their benefits used in their fabrics. There's just too much wrong with this company to make it a good investment. Wait until this is priced like CROX is today and then consider buying it.

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