Galtgate, for those who haven’t been paying attention, involves dominant yoga pants maker Lululemon embossing its bags with the question, “Who is John Galt?”
Sound harmless? Sure, if Galt were the Los Angeles Lakers’ most recent draft pick or a Nobel Laurete in chemistry. But he’s a figure in Objectivist guru Ayn Rand’s impossibly long novel “Atlas Shrugged.” (Wikipedia your hearts out here on Rand, if you don’t know much about her me-first, you-last philosophy.)
And all hell’s broken out. The story has been on NPR. Forbes had a columnist do a takedown on Lululemon. And — here’s one I saw via YogaDork — lucy, of all companies, has added a little “open letter” to the mix:
Dear John (Galt),
It’s over between us.
At first I loved hearing you talk about rising above mediocrity and pushing yourself to be your best. I felt like I had found a kindred spirit who, like me, strived to do my best and achieve great things. But then I realized you’re only out for yourself.
You used to say “friends are more important than money.” But now I know you only meant it when it was convenient for you. I see things differently. My success would be meaningless if it didn’t include others. So I’m going to go on with my fantastic life of fulfilling work, friends and making a difference…without you. I hope you are able to find what you’re looking for. Oh, and by the way, your yoga pants are too tight.
Hasta la vista,
lucy Activewear. Equality, goodwill and stretch pants for all! http://www.lucy.com
That comes from lucy’s Facebook page.
OK, so now you’re figuring out the headline to this post. Or so you think. It isn’t because you need to run out and buy those pants before your conscious gets the better of you.
It’s because Lululemon, the dominant giant of yoga apparel, may have made a key business mistake. It’s all about timing. Check this out:
This apparel company, which currently trades at $49 a share, has a number of red flags concerning its future. The first problem is the fact that Lululemon has a price to earnings ratio of 42.6 at the moment. This is in contrast to a 5 year expected earnings growth rate of 27.5 percent. Most consider fair value to pay for a stock to be equal to its 5 year expected growth rate. Using that system, LULU would currently be at fair value with a price of $31.62 a share, a staggering 35% decrease to its current price.
That’s right, Lululemon could be in for a major business plunge. And this link isn’t the only one predicting rough seas ahead. But guess what? None of the “business outlook” sites I’ve seen have mentioned Galtgate. So, on top of having a potentially shaky business set-up, Lululemon might also have some serious customer reaction — as in not buying their pants in protest — looming. That would hit the next time the company has to report earnings, and if it already has had trouble come December 1, when it is scheduled to release earnings, the once-darling of yoga wear could become … something that John Galt would have stepped over on his way to the ATM.
Posted by Steve