Lululemon Athletica

Methodology

Lululemon's earnings visibility depends on brand strength and fashion risk, with successful product innovation driving predictable growth but style missteps creating volatility. Store expansion and DTC growth provide some visibility, though comparable-store sales can fluctuate. The calculation works when brand momentum is strong but becomes unreliable during product cycle challenges.

Methodology

Lululemon has historically commanded premium PEG ratios reflecting exceptional brand positioning, pricing power, and expansion runway in athleisure. During periods of strong momentum, even seemingly high PEG ratios can be justified by sustainable growth visibility. Compare to the company's historical range and peer premium brands rather than traditional apparel retailers.

Methodology

Lululemon pays no dividend, making PEGY equal to PEG as management prioritizes reinvestment in store expansion, digital capabilities, and international growth. Capital allocation focuses entirely on growth initiatives and opportunistic buybacks. For this growth brand, earnings reinvestment matters far more than current income in driving shareholder value.