Chart of the Day – $GPS and $LULU for Talking Numbers

by Enis March 26, 2013 1:05 pm • Commentary

Here’s a preview of what I’ll be discussing on Talking Numbers today between 3:20 and 3:30 pm EST on CNBC:

Ashley Lutz at Business Insider had an article yesterday discussing the yoga pants wars between these two retailers.  I have no idea about the yoga pants market, and little view on fashion trends (I had no idea what Athleta was until this article), but her best bullet points (in my view) in favor of Athleta (owned by Gap) were as follows:

  • Athleta has more affordable price points ($69 vs. $98 for LULU)
  • Athleta has a lenient return policy
  • Athleta has a larger selection
  • Athleta doesn’t have supply chain issues

She had several other points, but those were the most salient.  Besides the suspicious headlines last week on LULU’s discussion of its pants inventory and production, the chart looks to be in the process of a long-term breakdown:

LULU 3 year daily chart
LULU 3 year daily chart, Courtesy of Bloomberg

 

Meanwhile, GPS has shown impressive strength in the last year.  It had a long-term breakout, shown by the 20 year monthly chart:

20 year monthly chart of GPS, Courtesy of Bloomberg
20 year monthly chart of GPS, Courtesy of Bloomberg

After the pop and drop during the tech bubble, GPS was a stagnant stock for about a decade.  It traded between 10 and 25 for practically that entire period.  When that range was finally broken in 2012, the stock shot higher, as fresh, new buyers overtook long-term sellers.  The stock has now traded above the important $30 for more than 6 months, and that should act as long-term support going forward.

Looking at the 1 year daily chart, GPS ran into trouble near its prior high from October of 37.85:

1 year daily chart of GPS, Courtesy of Bloomberg
1 year daily chart of GPS, Courtesy of Bloomberg

In the short-run, the stock is in a range between 30 and 38, but the long-run technical picture is brighter than it has been in many years for GPS.

In the fickle world of fashion, market players are voting that Gap has overtaken Lululemon for the leader’s perch for now.