Nice work - an original and refreshing take on the new CEO.
Even if she was responsible somewhat for what went wrong at Nike, her experience (of having made those mistakes) would probably be an asset for Lululemon.
I think maybe the more interesting question though is - has the market lowered the bar so much that Heidi only needs to be an average CEO for LULU to be a good investment candidate?
Great businesses can perform with below-average CEOs, good businesses need average CEOs, only poor businesses require great CEOs.
Agreed, and it's worth remembering that Nike peaked above $160 in late 2021 largely on the strength of the DTC business. That part tends to get left out. And the success or failure of a strategic pivot is ultimately the CEO's responsibility, not that of whoever was handed Division A or Division B.
On your taxonomy: by long-term returns on tangible capital, unusual for an apparel retailer, Lululemon clearly was a great business. By that same measure it is still a good one, though whether it stays there is the open question.
At ~$97, expectations for O'Neill are low. One way to see it: if it were announced tomorrow that Fran Horowitz was taking the reins instead, the stock would probably be north of $150.
Thanks for the deep analysis, lots of interesting insights!
I'm curious how you think about the lifecycle of brands. There seems to be something interesting happening where consumers want the newer, more exclusive brand, then as it becomes more mainstream and commercial, some of that appeal shifts to the next one. Maybe the same will happen to On Running in the next few quarters/years?
Is a structural limit to how many brands can maintain that premium positioning once the category becomes crowded? A few brands might break through, but do you think Lululemon is one of those?
Apologies for the slow reply, and thank you – this is the right question to ask. The lifecycle you're describing is real, and the chart is partly a record of it. Abercrombie and American Eagle both had their moment, and both settled into the low teens. So I'd say Lululemon did break through. Whether it stays through is the open question, and evidently breaking through isn't permanent – Nike managed it too and is now ~75% off its all-time high.
As for On Running, I haven't given it much thought. (Retail is a category I tend to approach warily, and yesterday's print is a reminder of why.)
Nice work - an original and refreshing take on the new CEO.
Even if she was responsible somewhat for what went wrong at Nike, her experience (of having made those mistakes) would probably be an asset for Lululemon.
I think maybe the more interesting question though is - has the market lowered the bar so much that Heidi only needs to be an average CEO for LULU to be a good investment candidate?
Great businesses can perform with below-average CEOs, good businesses need average CEOs, only poor businesses require great CEOs.
Which is Lululemon?
Thank you, much appreciated.
Agreed, and it's worth remembering that Nike peaked above $160 in late 2021 largely on the strength of the DTC business. That part tends to get left out. And the success or failure of a strategic pivot is ultimately the CEO's responsibility, not that of whoever was handed Division A or Division B.
On your taxonomy: by long-term returns on tangible capital, unusual for an apparel retailer, Lululemon clearly was a great business. By that same measure it is still a good one, though whether it stays there is the open question.
At ~$97, expectations for O'Neill are low. One way to see it: if it were announced tomorrow that Fran Horowitz was taking the reins instead, the stock would probably be north of $150.
Agreed.
any new thoughts after earnings?
Yes – glad it was only a small position! Beyond that is reserved for paid subscribers, I'm afraid. At least for now.
Thanks for the deep analysis, lots of interesting insights!
I'm curious how you think about the lifecycle of brands. There seems to be something interesting happening where consumers want the newer, more exclusive brand, then as it becomes more mainstream and commercial, some of that appeal shifts to the next one. Maybe the same will happen to On Running in the next few quarters/years?
Is a structural limit to how many brands can maintain that premium positioning once the category becomes crowded? A few brands might break through, but do you think Lululemon is one of those?
Apologies for the slow reply, and thank you – this is the right question to ask. The lifecycle you're describing is real, and the chart is partly a record of it. Abercrombie and American Eagle both had their moment, and both settled into the low teens. So I'd say Lululemon did break through. Whether it stays through is the open question, and evidently breaking through isn't permanent – Nike managed it too and is now ~75% off its all-time high.
As for On Running, I haven't given it much thought. (Retail is a category I tend to approach warily, and yesterday's print is a reminder of why.)
Fair!