According to the trading plan setup in December, Mr. Wilson was allowed to sell up to 5.7 million shares over a period of 18 months. And during 2013, he has offloaded around 2.3 million shares in several trades. But his $50 million sale was the largest among the lot. However, there is no way to ascertain if the sale was automatic or perfectly timed. According to David Yarmick, “The whole point of these plans is that if material events occur, as they inevitably will, the insider has an alibi against insider-trading accusations.”
But the bottom line still remains that Mr. Wilson was prepared to offload a massive chunk of his stake in the company. This highlights his faith and confidence in the company’s future growth trajectory.
Rising competition
Besides that, another commonality between Apple Inc. (NASDAQ:AAPL) and Lululemon is that both companies had a road map planned out when their respective CEOs were departing. But that doesn’t mean Lululemon will come out victorious.
Apple Inc. (NASDAQ:AAPL) is a top-notch premium and dominating manufacturer of consumer electronics and faces little competition for its premium offerings. However, Lululemon operates in the athletic apparel industry, where competition is increasing rapidly.
Athleta, Zobha, Calvin Klein and Under Armour Inc (NYSE:UA) are some of the leading brands that are trying hard to dominate women’s sportswear. As a matter of fact, Under Armour Inc (NYSE:UA) has several lines of athletic clothing for women, which raked in $400 million in fiscal year 2012. The company recently inaugurated its first exclusively for women retail store since 2008, which will be used to showcase its athletic clothing line for women. The message is clear: Under Armour is targeting Lululemon’s market share.
Final words
There’s no denying that Lululemon is slowing down. Perhaps a new CEO is what Lululemon needs. But it takes time to turn things around, and it wouldn’t be wise to expect blockbuster results immediately. With that in mind, Lululemon not only has to find a worthy CEO, but also revive its growth momentum. Hence, Mr. Wilson saw fit to offload over 2.3 million of his shares. This kind of insider activity prompts me to ask its investors one important question: if Lululemon’s chairman is drawing down his stake in a slowing company, then why aren’t you?
Lululemon has the potential to grow its sales by 10 times if it can penetrate its other markets like it has in Canada, but the competitive landscape is starting to increase.
The article 3 Reasons Why Lululemon Isn’t Apple originally appeared on Fool.com.
Piyush Arora has no position in any stocks mentioned. The Motley Fool recommends Apple, Lululemon Athletica, and Under Armour. The Motley Fool owns shares of Apple and Under Armour. Piyush is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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