🏃 Lululemon’s Prospects are Getting Ugly

MARKET UPDATE

Good Morning Investor! Shares of British data analytics and polling company YouGov ($YOU) nosedived 37% on Thursday after the company dialed down its full-year operating profit forecasts. Meanwhile, it’s all smiles at Accenture ($ACN). The company's shares jumped over 6%, buoyed by an optimistic earnings forecast fueled by booming demand for AI services. It appears that riding the AI wave is paying off handsomely for Accenture.

TODAY’S BIG HEADLINES

Lululemon’s Prospects are Getting Ugly

The Migrating Millionaire

Beloved “Unfiltered” App BeReal Has Been Sold

CONSUMER DISCRETIONARIES

Lululemon’s Prospects are Getting Ugly🏃

When the Lululemons Run Dry: Lululemon’s ($LULU) recent struggles seem to be snowballing, with the athletic-wear retailer feeling the heat from fierce rivals like Alo and Vuori. These competitors are eating into Lululemon's North American sales, causing shareholders to break a sweat over the company's future trajectory.

• Lululemon is having one of its worst years in recent memory, with the stock down over 40% year-to-date, making it one of the worst performers in the S&P 500. It seems the yoga pants giant is losing its stretch.

• This month, the hot-yoga staple reported flat comparable sales growth in its “Americas” unit, which accounts for over 70% of its quarterly revenue. Although international sales grew 25%, it’s cold comfort when North America dominates the market share. Adding insult to injury, the company provided a weak forecast for the current quarter, thanks to the relentless competition.

More Fruits in the Salad: Lululemon was a pandemic darling, with comfy fits perfect for at-home yoga, grocery runs, and work-from-couch sessions. But now, new contenders have emerged, stealing the spotlight. Prestige athleisure brands Alo and Vuori have made significant gains with stylish matching sets, often priced at $150 or more.

• Alo has leveraged the celebrity effect, with demand soaring after stars like Taylor Swift and Hailey Bieber were spotted in its leggings. The brand even enlisted Kendall Jenner for marketing, turning leggings into a must-have status symbol.

• Vuori isn’t lagging either, with Zac Efron rocking its men’s range and LSU gymnast Livvy Dunne fronting its ad campaigns. The brand is now valued at $4 billion, thanks to a recent $400 million investment from Softbank ($SFTBY).

• Athleisure Battle: Much like the love triangle of Chipotle ($CMG), Sweetgreens ($SG), and Cava ($CAVA), Alo and Vuori stores are sprouting up everywhere, often within a half-mile of a Lululemon location. The athleisure battlefield is getting crowded, and Lululemon needs to find a way to stand out in this stylish and highly competitive space.

MACROECONOMICS

The Migrating Millionaire✈️

The Dubai Boom: According to Henley & Partners' newly released Private Wealth Migration Report, Europe’s once-coveted spots for the upper middle class are losing ground to new favorites like the UAE and Singapore, thanks to their "tax haven" status. It’s like a game of musical chairs, and the taxman’s got the music cranked up.

• This year, a record 128,000 millionaires are expected to pack their bags and relocate. The biggest losers in this great wealth shuffle? China, with a net loss of 15,200 millionaires, and the UK, shedding 9,500.

• Experts point to shifting tax regimes as the main culprit behind this exodus. Even Italy, with its pasta and picturesque landscapes, is set to attract 2,200 new millionaires in 2024. Buon viaggio!

Learning the Hard Way: The UK's chancellor, Jeremy Hunt, announced the end of a 200-year-old policy that protected "non-doms"—Brits with permanent tax residence outside the kingdom—from UK tax on foreign income. The perk’s duration is now slashed from 15 years to a mere four, possibly being abolished entirely. Unsurprisingly, this has added fuel to the already blazing exodus from the once-great island. It seems even the most loyal subjects prefer their taxes a little less taxing.

• The Millionaire Magnet: Henley predicts the UAE will see the largest influx of millionaires, with around 6,700 moving to this elective monarchy in 2024. And who can blame them? The UAE and Dubai offer a tempting cocktail of 0% income tax, 0% inheritance tax, 0% capital gains tax, and an inviting golden visa program. It’s a financial paradise—at least for now.

• UAE’s New Taxes: However, even paradise has its downsides. The UAE has started implementing taxes on a small scale due to its volatile oil and gas revenue. A 9% corporate tax took effect in 2023, following a 5% VAT introduced in 2018. So while the sands of Dubai might glitter with golden opportunities, there’s a hint of tax in the air.

SOCIAL MEDIA & SOFTWARE

Beloved “Unfiltered” App BeReal Has Been Sold🧳

One-Trick Pony: It's time to get real about "BeReal." This anti-establishment social media app took the world by storm during the pandemic with its unique concept of capturing spontaneous moments once a day, prompted by a notification. Users would snap a selfie and a front-facing pic, creating an unfiltered snapshot of their day.

• Despite rocketing to No. 1 on the Apple App Store during the summer of 2022, BeReal's growth has hit a plateau, and the once-fresh idea seems to have gone a bit stale.

BeReal Finds a Savior: Enter Voodoo, the French mobile-app publisher stepping in to save the day with a $540 million purchase of BeReal. As part of the deal, BeReal’s CEO and co-founder will bid adieu. Despite its initial success, BeReal has struggled with dwindling growth and cash flow issues, sparking rumors of a potential sale. Voodoo's plan? Turn BeReal into a sustainable business by introducing ads. However, this strategy might not solve the problem of declining user numbers.

• The Irony of BeReal's Success: BeReal's charm lies in its anti-social media stance—no endless scrolling, no celebrities, no influencers, and crucially, no ads. This very appeal is also its monetization nightmare. The platform’s design goes against the grain of traditional social media revenue models.

• According to Platformer, BeReal’s user base has plummeted from a peak of 15 million in October 2022 to 6 million in March 2023. Meanwhile, Voodoo insists the platform has over 40 million active users. It's a numbers game that feels a bit like trying to take a perfect selfie in one take—tricky and perhaps a tad misleading.

MORE NEWS

Additional market-moving events🌎

X’s Secrets Revealed: Newly released documents have revealed that Elon Musk’s X has seen its revenue plummet. (Mashable)

Bitcoin-Mining Telecoms: T-Mobile ($TMUS) parent company Deutsche Telekom has announced its plans to begin mining Bitcoin. (CoinDesk)

SEC vs Eth Concludes: Crypto firm Consensys says US regulator has closed inquiry into Ethereum 2.0. (Reuters)

Netflix Revives The Cinema: Netflix’s new immersive entertainment and retail experiences will be opening in 2025 in Dallas and Pennsylvania. (The Verge)

OUR PICKS

Our selections performance👾

On Monday the 11th of March, we released our “two superperformers” stock picks which we believe will provide significant outperformance compared to the S&P 500. Then on the 10th of June we released our next stock selection.

Here’s how the three stocks have performed since:

• Evolution AB: 1,089.00 SEK (📉-17.02%)

• Hims & Hers Health: $22.39 (📈+54.73%)

• PayPal: $59.80 (📉-7.67%)

Make sure that you’re subscribed so that you don’t miss our next stock picking research report!