Lululemon Athletica inc. (LULU): Does This Retailer Need to Grow Up?

On a fundamental basis, Lululemon is still a strong contender, with a clean balance sheet, double-digit revenue growth and a much wider profit margin than either NIKE, Inc. (NYSE:NKE) or Gap. Its earnings have been dragged down to single-digit growth by the aforementioned pants recall, but its long-term bottom line growth is still intact.

The Foolish bottom line

At current prices, Lululemon Athletica inc. (NASDAQ:LULU) is a hard investment to make. Even though the company has great growth fundamentals, its past quality control issues, the loss of two key leaders, and mounting pressure from larger retailers like NIKE, Inc. (NYSE:NKE) or The Gap Inc. (NYSE:GPS) all present major challenges. Investors should wait to see if the company can find a worthy successor to Christine Day, who can continue to expand its footprint while maintaining the product’s quality and innovation, before they make a bullish or bearish call.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Lululemon Athletica and Nike. The Motley Fool owns shares of Nike.

The article Does This Retailer Need to Grow Up? originally appeared on Fool.com.

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