My new favorite brand is Lululemon (LULU). I am celebrating the fact that I am finally “fit” enough to “fit” into their yoga pants. Lululemon is a great example of an aspirational brand. People are willing to pay more to wear this upscale brand of clothing and, as a result, the company’s adjusted gross profit margins are a lofty 57.3% on $3.3 billion in annual revenue.
Brand value is an intangible asset that does not show up on the balance sheet, but it does translate into pricing power, profit margins, and strong sales. It is no wonder then, that owning a basket of the top 50 brands yields superior investment results, beating most major indices over the last 10-year time period.
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