Weekly Roundup 2022-08-05

Author: Danyaal Munshi

Weekly Roundup 2022-08-05

Lunar Capital Weekly Roundup

Index / Fund / RateStart of YearLast weekThis Week% change YTD
JSE ALSI73 72368 93469 519-5.70%
NASDAQ Composite15 83312 39112 658-20.05%
S&P 5004 7974 1304 145-13.58%
Prime Lending Rate7.25%9.00%9.00%24.14%
Lunar BCI WW Flexible Fund165.68148.08150.04-9.44%
USD/ZAR15.9616.5316.775.08%
EUR/ZAR17.9517.0017.07-4.90%
Brent Crude77.86103.5994.3821.22%

Source: iress

Company and Market News

Under Armour: a creator, marketer, and distributor of branded athletic apparel, released their Q1 2023 results last week. For the quarter, revenue remained flat at $1.3 bn compared to Q1 a year ago. Net income decreased from $59m in Q1 2022 to $8m in Q1 2023. The share price of Under Armour increased by 4.06% this week despite the disappointing news.

Under Armour operates in the athleisure/athletic apparel space with other brands such as Nike and Lululemon. Despite Under Armour and Lululemon making athletics-wear for the same purpose, Under Armour sells products to the mid-income market compared to Lululemon, who sell products to an upper-income market. An example would be if we compared the price of leggings. A pair of Under Amour leggings go for just under $75; whereas a pair of leggings from Lululemon can go for just under $100, with some leggings being priced at just under $120.

One of the things we like about premium brands, at Lunar Capital, is that they have higher margins compared to other brands. People that like a specific premium brand will stick to buying that brand compared to others. A downside, however, would be that in this current market, when interest rates are going up, and the disposal income of consumers is decreasing – consumers who were on the fringe of buying premium products may hold off on buying these products.

Below is a table comparing the margins and other financial indicators of Under Armour and Lululemon.

CompanyMarket Cap @ 5 Aug 2022 ($bn)PE Ratio @ 5 Aug 2022Gross MarginNet Margin
Under Armour4.0412.8049.67%5.43%
Lululemon40.5640.4356.87%15.35%

 

Disclosure: Lululemon is held in the Lunar BCI Worldwide Flexible Fund.

Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/

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The Lunar BCI Worldwide Flexible Fund Fact Sheet together with our Disclaimers can be read here.

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