Weekly Roundup 2022-08-05

Weekly Roundup 2022-08-05

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 BCI 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 BCI Worldwide Flexible Fund.

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

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