Lululemon athletica inc. (LULU)

LULU
LuluLemon
This company being valued in the Billions is retailer of overpriced yoga equipment and clothing. This is a fad trading at a valuations that demands this fad continues to grow rampantly – yet the comparable numbers don’t look very good. At this valuation there is little (no) room for error and I don’t feel Americans are going to be purchasing new $100 yoga mats and $80 yoga shirts. Once the fad passes, this will be a $1 or $2 stock. Why pay $100 for a spiffy yoga mat when you get them at Target for $9.99. And if you are one of the few who loves to buy $100 yoga mats, I am assuming the need for a second isn’t an often occurrence.
Profile:
Lululemon Athletica Inc. engages in the design, manufacture, and distribution of athletic apparel and accessories for women and men in Canada, the United States, and Australia. The company’s apparel products include fitness pants, shorts, tops, and jackets for healthy lifestyle activities, such as yoga, dance, running, and general fitness. Its fitness-related accessories comprise an array of items, such as bags, socks, underwear, yoga mats, instructional yoga DVDs, water bottles, and headbands. The company sells its products through its retail stores, as well as through independent franchises and a network of wholesale accounts that includes yoga studios, health clubs, and fitness centers. As of February 1, 2009, Lululemon Athletica Inc. had 103 retail stores, including 42 in Canada and 61 in the United States; and 5 franchise stores, including 1 in Canada and 4 in the United States. The company was formerly known as Lululemon Corp. Lululemon Athletica Inc. was founded in 1998 and is headquartered in Vancouver, Canada.

The stock trades at :
9 x book value
4.5 x sales
44 x earnings
1.55 Billion Market Cap

The company has no debt and $1 per share in cash – no red flags here but I am willing to bet they will need this cash in the future as operations start to decline.

Quarterly earnings growth YOY = negative 17% (this will improve but it sure better at 44 x earnings)
The cash flows don’t support this valuation.
The future business outlook doesn’t support this valuation.
The economic moat is non existent.
Go to their website: http://www.lululemon.com/

In my opinion, the men’s apparel is ridiculous (and that’s being kind)

This is not a situation where I think the company is going bk (like I do with Moodys) – but I feel that the stock is grossly overvalued. Any errors moving forward will deflate this bubble stock quickly. Otherwise, I expect a slow grind lower over time.
High End Target = $10.00

In real life :
I am short with $25 puts - bought at the money. I added to this position on the way down including at the current price on Friday at $22.