Professor Elam

Monday June 10, 2013

I have had fun pointing out the success of Lululemon, a purveyor of high priced yoga togs. Some of our female students have taken me seriously when I questioned whether they would be seen in an $18 Target tank top when the $50 Lulu version awaits at the Quarry. 

This article on Lulu's price earnings ratio demonstrates what we are studying in ACCT 3310 and 3314 now. Lulu trades at 41.2 p/e, way higher than Nike at 23.3. Gap is only worth 2/3 more than Lulu but 

Gap earnings were 4x higher

revenue 11x higher

retail floor space 60x higher

how can this be?

I spent an hour last week explaing hte implications of socionomics to my yawning ACCT 3314 class. But here it is in action. Lulu is fashionable among mutual fund managers, the buzz is on, and so a dollar of Lulu earnings brings 41x in  value while Adidas brings a mere 18x. How long can this last, until the mood changes!