Lunar Capital Weekly Roundup
| Index / Fund / Rate | Start of Year | Last week | This Week | % change YTD |
|---|---|---|---|---|
| JSE ALSI | 73 723 | 68 934 | 69 519 | -5.70% |
| NASDAQ Composite | 15 833 | 12 391 | 12 658 | -20.05% |
| S&P 500 | 4 797 | 4 130 | 4 145 | -13.58% |
| Prime Lending Rate | 7.25% | 9.00% | 9.00% | 24.14% |
| Lunar FR WW Flexible Fund | 165.68 | 148.08 | 150.04 | -9.44% |
| USD/ZAR | 15.96 | 16.53 | 16.77 | 5.08% |
| EUR/ZAR | 17.95 | 17.00 | 17.07 | -4.90% |
| Brent Crude | 77.86 | 103.59 | 94.38 | 21.22% |
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 $120.
One of the things we like about premium brands, at Lunar Capital, is that they have higher margins compared to other brands. People that like a specific premium brand will stick to buying that brand compared to others. A downside, however, would be that in this current market, when interest rates are going up, and the disposal income of consumers is decreasing – consumers who were on the fringe of buying premium products may hold off on buying these products.
Below is a table comparing the margins and other financial indicators of Under Armour and Lululemon.
| Company | Market Cap @ 5 Aug 2022 ($bn) | PE Ratio @ 5 Aug 2022 | Gross Margin | Net Margin |
|---|---|---|---|---|
| Under Armour | 4.04 | 12.80 | 49.67% | 5.43% |
| Lululemon | 40.56 | 40.43 | 56.87% | 15.35% |
Disclosure: Lululemon is held in the Lunar FR Worldwide Flexible Fund.
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