3xing Lululemon to $100B

🧠 The Takeaways

Today, we’re taking Lululemon’s stock dip as the opportunity to jump in with an activist stake to build it into the $100B megabrand it should be.

1. Getting out of the categories Lululemon has no reason to be in.

2. Increase product value to charge $250 for yoga pants.

3. Launch a Nike-level scouting program to find Lululemon’s version of Jordan's.

+ How was March at CocoAI?

LBAB! Community - Coco March Update

I’m going to start sharing a monthly high-level update on Coco: how it’s going and where we’re going.

March was the first full month of ownership of the app, marked by great highs and tough challenges.

The highs:

1. We quickly brought on a great team of software developers, a marketer, and a seller.

2. We onboarded a lot of new brands and expanded existing usage.

3. We kicked off really exciting feature expansions.

The challenges:

1. We finished 1 net new deal shy of the target. It hurts to not have that last deal.

2. We finished <90% of the forecast. Post-holiday contraction hits Europe in March, and I wasn’t expecting it to be so bad.

3. It was absolute cash flow hell. I had to come completely out-of-pocket due to a quirk in Shopify’s payments. All our remaining payments for Feb–April will hit this month, which will give a huge injection of capital that we need.

All things considered, it was a challenging (but great) month that really clarified our priorities and the bets we need to make over the next 6mos.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here.

Lululemon, everyone's favorite Yoga pants brand, is getting dragged in the markets and trading below its historical averages because of the Trump Trade war. 

• Share Price: $255

• Market Cap: $30B

• L5 Performance: +41%

• P/E Ratio: 17x

Despite beating Q4 Rev + Profit expectations, the stock nosedived -24% in the last month on low forecasts and tariffs.

Financial Summary

TLDR Analysis: They are cooking.

• Rev growth >>> COGS, OPEX 🤤

• SG&A slightly outpacing Rev. 😐

• Net Income has the largest growth. 👍👍

Lulu’s chugging along. COGS are under control, Rev is growing (mostly outside the US). and Net Profits are increasing. 

Basically everything we want to see. 

If there weren’t a trade war, Lulu would probably have rosy forecasts, and its stock would be ripping on the great earnings.

Let’s Fix This Biz

Here are our 3 tactics to turn Lululemon into a $100B powerhouse.

1) Get TF out of side quest categories

Why on God’s green earth is Lululemon making Bags? 

You can always tell the product categories a brand shouldn’t have entered by what’s in their clearance section.

Guess what’s all over theirs?

Bags, hair ties, water bottles, and yoga mats.

These are products that sound “smart,” but Lulu shouldn’t be making them. Nailing Apparel is already extremely hard. If they’re going to move into other categories, they need to focus on ones with much better LTV.

Now, they’ll have to perfect the art of liquidation, and they’re already set up to do it.

They should move excess inventory to their existing Resale program instead of a separate clearance section.

Just like Nordstrom & Nordstrom Rack. Rack accounts for 1/3 of Nordstrom’s total Rev.

They’ll keep the core brand (with premium products they can’t keep in stock) and have a separate, cheaper resale brand (plenty of customers will jump at anything Lulu that’s affordable).

Takeaway: Smart Catalog decisions protect margins. Overexpansion gets you into the liquidation game.

2) Convince Women to buy $250 Yoga pants

Lululemon has completely lost its Premium branding edge. 

Given the Alo Yogas and Vuoris of the world, everyone’s selling $100-$150 Yoga pants. And at the low end, Walmart + Amazon are selling them for $10.

Lululemon now looks like everyone else. 

The death of a first mover.

They need to find a way to convince customers to pay more than market average again. Customers will build outfits around premium yoga pants, and higher AOV will follow.

It could be an innovative material collab or new pants features. I’m game for anything, as long as it locks them back into Premium/Luxury.

If they can get customers excited about something new, the highest earners are willing to spend significantly more.

Takeaway: Product innovation is always the key to staying ahead of the competition.

3) Launch an Influencer scouting program

Like Nike or Adidas, Lululemon should have a scouting program to sign exclusive deals with up-and-coming athletes/influencers. 

With one twist. 

The influencers have to be Health- and Wellness-focused (instead of the usual most famous athlete in a sport).

The top 5 IG Yoga influencers have a collective 41m followers, but there are thousands of other influencers. Instead of just having a run-of-the-mill Influencer program, it’s time for Lululemon to run Nike’s playbook. 

Take $20-30m out of the SG&A budget to start, and sponsor major athletes, influencers, and celebrities who are Lululemon customers.

Find the absolute best collabs + create a brand with them.

Like Jordan or NikeSKIMS.

Will they all work? No.

But if Lululemon can find that 1 perfect partnership that redefines both brands, it’ll unlock a new brand halo and tons of fresh, profitable sales to get them to a $100B market cap. 

Today, the Jordan line accounts for $6.9B/yr (15% of all of Nike’s Sales).

Takeaway: Launch a sponsorship program to catapult brand awareness + sales.

Final Thought

This is where the public markets get out of hand. Where politics makes too much noise + doesn’t just let great bizs build.

1. With massive uncertainty from Tariffs/Trade wars, no smart Exec team is going to have bullish forecasts.

2. If Company forecasts aren’t bullish, analysts are going to have lower stock projections.

3. “Smart money” is going to sell off the stock today on lower projected earnings.

But this has nothing to do with how Lulu will actually perform. We don’t know how the economic policies will actually affect these bizs in 2025.

Everyone is going to show conservative to negative growth forecasts because they’re preparing for the worst.

Lululemon is predicting slower sales and lower gross margins, but that’s also air cover for them to underpromise and overdeliver. It’ll be the easiest thing in the world for them to get on their earnings calls in Q1 2026 with performance that crushed their “expectations.”

• “Tariffs didn’t impact our supply chain as much as they could have.”

• “Consumer demand remained stronger than expected.”

• “We pivoted and did xyz to combat rising costs.”

If the bottom doesn’t fall out, this could be one of the greatest temporary dips in the market we’ve seen. 

Bizs like Lulu had banner years in 2024 and continued to print profits. Consumer demand was “in the toilet,” but consumers kept buying. 

I’ll be watching Q1 + Q2 earnings closely to see how much of this is just noise vs. an actual change in the economy.