Shares of popular athleisure brand Lululemon have fallen sharply this year, trailing the S&P 500 by a wide margin. Its shares were only included in the Wall Street index last October and have fallen nearly 28% so far this year. Is it a good deal for investors right now? Portfolio manager Jack Dwyer said that while the stock has “polarized opinion” and “sparked intense debate”, he believes the company is currently at its “most attractive” stage. The CEO of Infusive Asset Management told CNBC Pro Talk on Wednesday that while Lululemon has historically been viewed as a yoga brand, its profit margins are “closer to some emerging luxury goods businesses.” But what interests him most is that Lululemon’s international expansion opportunities are “still in their infancy,” Dwyer said. He noted that the company plans to double its number of stores in China between 2022 and 2026. According to Dwyer, the international business, of which China is a part, accounts for 20% of its group sales and is growing at around 50% annually. “So, assuming the company achieves its goals over the next few years, we’ll be trading near pre-pandemic 10-year lows,” he said, adding that Lululemon is unlikely to face any geopolitics around China risks. “What geopolitical implications might this have? Internally, it can be used as a potential tracking horse, which can have an impact depending on the needs. So far, that doesn’t seem to be the case, and in fact, locals really like the product and post it on social media,” he said. He noted that yoga and athletics are “growing rapidly” in China and that the government plans to increase the number of gyms by 50% by 2030. “Millennials make up about a third to 40 percent of China, and Gen Z is a much larger demographic — they’re brand fans,” Dwyer said. “As such, we feel some comfort that this is in line with the government’s ambition to create a healthier society.” Potential upside of 28.1%. Dwyer manages Infusive’s Consumer Alpha Global Leaders Fund. In addition to consumer stocks like McDonald’s, LVMH and PepsiCo, its major holdings include Amazon, Netflix and Alphabet.
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