Thanks for the nice write up of LULU. One comment on the whitespace in relation to comps like NKE, etc. - personally, I am undercutting their potential to reach the comps' scale because of the lack of wholesaling. For example, I don't expect to see LULU products at a TJ Maxx or Ross which may limit the volumes. Honestly though I'd prefer to keep it that way to protect the brand and allow them to keep earning these very high returns on invested capital.
I think the mouse trap they have compared to comps set them up nicely to deliver attractive returns to shareholders if they are savvy with their capital allocation.
I would agree that LULU's volumes will be limited relative to Nike's due to their D2C approach, and they should do so to protect the brand and maintain a high ROIC.
What I would note is that Unaided Brand Awareness is more of a marketing term that demonstrates how well known or recognizable a brand is to the general public. So a company could theoretically reach 90-95% Unaided Brand Awareness and still have lower volumes than a competitor, but would have effectively reached the saturation point in that market. I referenced the datapoint simply as a metric that I used to gain confidence that LULU still has a significant amount of room left to grow in the US market without speculating on a terminal level of revenues for the geography.
At the same time, my simple rule-of-thumb is that's reasonable to assume the upper limit for LULU's revenue potential is Nike's D2C revenue, or about $20B.
Thanks for the nice write up of LULU. One comment on the whitespace in relation to comps like NKE, etc. - personally, I am undercutting their potential to reach the comps' scale because of the lack of wholesaling. For example, I don't expect to see LULU products at a TJ Maxx or Ross which may limit the volumes. Honestly though I'd prefer to keep it that way to protect the brand and allow them to keep earning these very high returns on invested capital.
I think the mouse trap they have compared to comps set them up nicely to deliver attractive returns to shareholders if they are savvy with their capital allocation.
Hi Philip, thanks for commenting.
I would agree that LULU's volumes will be limited relative to Nike's due to their D2C approach, and they should do so to protect the brand and maintain a high ROIC.
What I would note is that Unaided Brand Awareness is more of a marketing term that demonstrates how well known or recognizable a brand is to the general public. So a company could theoretically reach 90-95% Unaided Brand Awareness and still have lower volumes than a competitor, but would have effectively reached the saturation point in that market. I referenced the datapoint simply as a metric that I used to gain confidence that LULU still has a significant amount of room left to grow in the US market without speculating on a terminal level of revenues for the geography.
At the same time, my simple rule-of-thumb is that's reasonable to assume the upper limit for LULU's revenue potential is Nike's D2C revenue, or about $20B.