LULU 的低市盈率在 CEO 更替、创始人代理权之争以及北美放缓加快之后失效。北美已饱和；中国同店销售下降 8%，紧身裤销售下降 20%，市场份额下滑至 44%。品牌并未受损，仍占据该品类一半份额；尽管回调合理，市场情绪仍过度悲观。

I was pretty bullish on Lululemon at that time and and its valuation So, Lululemon was definitely an easier sell to a cheapkate like me. It was trading very cheaply. Uh, I think, you know, 10, 12, 14 times earnings, and even with slowing growth, I still thought it was cheap enough to make a decent return.

And so a few things have since gone against me with that bet, including the CEO stepping away and being replaced with two interim co-CEOs, a proxy battle with the company's founder, Chip Wilson, and then just a deceleration in sales in their core market of North America that honestly occurred much much faster than I anticipated.

especially because I I thought I was buying Lulu with a pretty wide margin of safety, but still things manage to go worse than I imagine.

because Lulu has very much been a painful reminder to me that stocks that look cheaper are not always the better place to put capital.

And while I I do think there's a few product lines like Golden and and TNA that are more direct competitors, I mean, for the most part, there really is not a much overlap with its product assortment and and Lululemons.

So, the one that of course jumped out to me, and you can add this to your tally, Kyle, is Lululemon. Lulu received $135 million in refunds last quarter, and that added 86 cents a share to their earnings in a quarter where revenue actually fell off 4%.

It was a pretty similar thing for me where it felt like for much of my life at this point, Lululemon was the premium brand women wanted to wear for athleisure. Really almost regardless of age and in recent years that was increasingly true for men's wear, too.

And and that is what made me think that the brand has really transcended being a fad, which I don't think it is, but also their staying power hasn't proven to be as robust as I would have hoped either.

So regardless of whether I made the right or wrong bet on Lulu, which we're not here to litigate today, being the Peter Lynch fans that we are, I do think we always appreciate brands that we can touch and and sort of feel and have some sort of emotional contact with.

And for me, it was my firsthand experience with wearing Lululemon products that I could really appreciate their quality and that helped me really decide on making an investment decision.

One of the advantages that Lululemon has had is its ability to sell its own brand and really take control of how the brand is perceived. And I I know you like Lululemon as well, Kyle.

So, you are familiar with how well-kept those stores are too, and how they relied on a network of actually yoga teachers that they sponsor as a way to spread the brand more organically, with the idea being that students will want to wear what they see their instructors wearing.

And if Lululemon were to sell its apparel in other stores, I do think the brand's image would be at much higher risk of of being diminished simply because Lululemon is handing over control of how its products are presented and whether they're discounted or or placed alongside less desirable brands.

That really is the risk of selling through third party retailers. And the point being they they might not treat your brand the way you'd like them to. And for that reason, Lululemon does not allow its merchandise to be sold by third parties so they can control the customer relationship.

And so basically, they're successfully running this first party playbook of owning the customer relationship that Nike wanted to achieve and that Lululemon does for the most part do. And in Nike's case, they quickly gave up on.

And so, I don't think Lululemon has had one of these moments where it really burned its customers. But I also be lying if I said the brand hadn't lost some of what makes it special.

And so, leggings are are roughly a third of Lulu's sales. And they fell about 20% last quarter as taste shifted toward looser outfits.

And by one estimate, Lulu's share of the athleisure market was actually down about 10 percentage points in August to roughly 44% with Aloe and Viori taking a lot of that market share between the two of them.

So, I would describe it as maybe a less broken brand and really more of a product engine. You know, the the suite of products that they've rolled out have been stale and landed flat.

And Lulu still owns really close to half the category. So, it is their game to lose. And people clearly do still love the brand.

And the question is whether Heidi O'Neal, the former Nike executive who just took over as CEO this month, can make the product exciting again.

And yes, I I do see the irony there that Nike has been my example of another imperfectly managed retail brand. And now we have Heidi coming from there to try and and save Lulu.

Yeah. Well, we'll see how that all works out here. So, I'm not sure Lululemon's brand has really faltered either. Just like you said, I still see people wearing them all the time.

So, my primary worry with Lululemon, which I've had for the past few years, is just that the brand is incredibly wellknown in its primary market of North America. And because the US was such an incredible growth story for so long for Lululemon, it's been largely saturated, which means that growth is becoming increasingly harder to come by.

But I I I think I'd like to dig into maybe the debt question a bit more here because part of what attracted me to Lululemon was that it really needed pretty much zero debt to operate.

And so that was true at least until the last 12 months where its net debt to IBITA went from being negative and and now is about.3 times.

Uh so again that was that was part of the draw for me of looking at you know their industry leading rates of return on capital, their strong balance sheet, their ability to to self-fund their own growth.

All of that was was very promising on top of this more Peter Lynch anecdotal fact that I I had a lot of uh consumer confidence in the quality of the brand and um felt like it was very popular still with a lot of my friends and and family.

And if you just look at Lululemon, which again recently handed the keys to an outsider from Nike, the market did not exactly cheer on that news.

I think if you're in retail, you just want to avoid at all costs really this Nike or Lululemon moment when it feels like someone has flipped a switch and just suddenly reduced the relevance and impact of your brand.

And I doubt Nike or Lululemon will disappear entirely anytime soon. I can say that very confidently. But their brands have have certainly weakened over the last few years. And that has been to the chagrin of shareholders.

Lululemon had lots and lots of blowout quarters like these, lots of incredible numbers.

Now, it's worth noting that I know the market definitely pays very, very close attention to inventory levels because I think you have to in retail. So, I know in the past with Lululemon, they've had these rising inventory levels that people have pointed out, but you also have to remember they're increasing the size of their distribution centers and their demand is going up higher and higher.

So, yes, while inventory is raising, you would kind of expect that from a brand that's also selling more and more apparel.

What is it with these uh premium apparel brands coming from Canada and then taking over the US, right? That's that's the story of Limit, too.

>> Well, I I think Lululemon is again a good case study here. China has been a real bright spot for Lulu with revenue there growing around 30% as recently as the first quarter of this year.

But even at that pace, it couldn't make up for North America decelerating because the Americas are still roughly 3/4 of Lulu's sales while China is only about 15%. And just to offset a 5% decline in America's revenue, China would need to grow something like 25% a year.

And last quarter, even China began to slow sharply with comparable sales there falling 8% in in constant currency. So international can be really a great second act, but it's hard for it to rescue a business once its core market begins to stall out.

Now, I think the big differentiator that you get with a business like Aritzia versus a Lululemon or a Nike is that the business has a lot of revenue growth left in it.

And I still think the brand has a long way to go until it gets that kind of saturated feel that Nike and Lulu are now experiencing. >> So I I got to say, Kyle, I feel like you have made me more appreciative of this business than I would have been after you first pitched it, especially since I was reeling a bit from my Lululemon losses.

And I think part of that is my experience with Lululemon.

And so unlike Lululemon, it really is a brand that I just have no consumer touch points either.

So, I set the overunder for Lululemon mentions at about 10 and the final count and in fairness I'm including a few of my own is over 30.

Retail has always been brutal though. But yeah, I hear you. A correction in Lulu stock was warranted as growth has started to slow and tariffs complicated things.

But Mr. Market seems to have really excessively soured on a great company after what really has been the first signs of trouble. With almost all of its sales coming from DTC rather than wholesale, Lulu controls its brand and destiny in a way that few other brands can. to say nothing about the success they've already had expanding in China.