Why Lululemon (LLL) is a poor stock and why you should sell

Have all the retailers like Nike, Under Armour, Joe Fresh, and even Walmart started ambushing the expensive clothing of Lululemon?

The answer is YES.

This stock has gone done well for shareholders but I feel it’s time is up.

Here is the good news:

[box type=”tick”]Profit rose to US$38.8 million or 27 cents per share, up from $25.7 million or 18 cents per share in the same quarter a year ago. Revenue gains were 31% from a year ago to $230.2 million. [/box]

Here is the bad news:

[box type=”alert”] LULU appears to have a lot of unsold inventory that may have to be sold at discounted prices (further compressing margins). Inventories in January 2011 were $57,469,000. Currently, inventories have swelled to $129,169, 000. [/box]

This means sales are down and for the next quarter results I expect same-store sales to also be lower.

In this economy, $100 yoga pants are no longer a luxury.

[highlight]This week, Coach and Tiffany were also downgraded so LLL should be next.[/highlight]

 

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