Fashion Investors: A Tale of Exuberance and Hysteria

Fri, 15 May 2026 23:20:07 -0400

“Lululemon Athletica (LULU) is not a long-term BUY”[/posts/lululemon-is-not-a-long] - December 8, 2024

Consumer trends was the risk factor I provided, and then the P/E NTM plunged to levels never seen before (9.9). American Eagle (AEO) is at 8.7 and ANF is at 6.7. The Gap (GAP) should be a good base line comparison of a clothing company who’s stock is not priced based on speculative consumer trends (9.1). Now that LULU is priced similar to the other fashion brands, I believe it’s undervalued. A better explanation for slowing revenue growth is that consumers are in a per capita recession. This is true in Canada, where nominal savings has gone down for multiple years straight. Less savings means less money is spent on niceities. Even the stock is priced as if we are in a per capita recession!

Of course, then there’s Aritzia (ATZ.TO) which normally would indicate changing consumer trends, but it’s a growth stock trading at 31x P/E NTM with 12% growth and only C$3.4B TTM sales compared to LULU’s $15B. LULU was trading higher than it currently is when it too had $3.4B TTM sales (2019-2020). It would’ve been trading at $20B if it had a 31x P/E NTM.

Another example of why per capita recession is a viable explanation is that Nike (NKE), which has been getting pumpelled since 2021 has maintained it’s P/E ratios. This indicates that the brand is still alive, but that sales are going down. My explanation again is that although the system has more money, customers do not have that money.

A lot of Canadian companies are not affected by this since they are necessities or are export-driven. However, tellecommunications is where you can start to see the effects of lower nominal savings.

The solution to inflation-induced price floors for goods is not socialism but contractionary monetary polices that would allow natural deflation to occur due to consumers' loss of spending power since 2021.
— Elijah Lopez (@elibroftw) May 16, 2026

Lululemon Athletica (LULU) is not a long-term BUY

Sun, 08 Dec 2024 15:30:37 -0500

2025 - 2026 update: $LULU is a buy under $230.

I originally came to this conclusion in September (12th), but it was sitting in my pinned Google Keep for months. The recent sky rocketing of LULU is just another piece of evidence that the market is irrational. The stock was bleeding for months when I decided it might be time to buy but my investing philosophy at the time was “is it possible to regret my purchase in 10 years.” When I invest in stocks, I value peace of mind over maximizing profits. Of course, one way to do that is to invest for a specific time horizon. The other way, which I am going to start implementing is to do the work to arrive at a sell price. That was the strategy to use when it comes to LULU.

The compelling reason that existed to buy LULU is because I thought the Chinese will buy their apparel when their economy recovers (I was proven right as the stock skyrocketed recently on International sales). Even so, I still needed a sell price. And that’s the problem. It’s impossible for me to arrive at the short-term fair price, so heuristics will need to be used (for future stock considerations). Two heuristics I employ are industry P/E (many issues with P/E) or historic cashflow yield standard deviations as seen below.

The reason I didn’t purchase LULU in September is because this is not a buy and hold stock. Once you go on Instagram, you’ll quickly realize that LULU does not actually have a moat and many relatively unknown and yet sizable brands, are also using influencer marketing such as:

This indicates market saturation and is a red flag to me. This is also why I never bought and do not recommended stocks like Celsius. The good thing about all this research though is that I have a list of luxe-like retailers for the purpose of buying gifts. These companies could make a lot of money if they also started targeting ads at men in relationships.

So investing in retail stocks would usually require very high insight into the market so that you can quickly respond to trends. Sorry, that’s not me, but the investment funds that manage billions of dollars in assets could easily pay someone to keep track of these trends for themselves.

Retailer stocks include but are not limited to LULU, ANF, CROX, BBW. The problem I have with these stocks isn’t their valuation. They could be undervalued, I’m just saying that these stocks are better valued by actual professional analysts who have more market trend information on their hand than individual investors who can only really buy using anecdotal, financial, and/or macro analysis. Micro-economics is an advantage for being an investment banking analyst, but when it’s not a full time job, you need to be aware of [your] bounded rationality.

Fashion on ELL Blog

Fashion Investors: A Tale of Exuberance and Hysteria

Lululemon Athletica (LULU) is not a long-term BUY