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Analysts like the way yoga brand Lululemon stretches

Lulumon is allocating about 20 percent of its store space to men's apparel, which currently makes up only about 12 percent of sales.
Lulumon is allocating about 20 percent of its store space to men's apparel, which currently makes up only about 12 percent of sales.Lululemon Athletica

Fittingly for an athletic apparel retailer, Lululemon Athletica is treating its growth like a marathon, and analysts approve of the way the Vancouver-based brand is pacing itself.

It's only a slight exaggeration to say that many investors think the company that invented a market for $100 yoga pants pretty much out of thin air can do no wrong. The stock is trading near its 52-week high of roughly $75, and some think it still has a long way to go. Michelle Tan of Goldman Sachs gave a six-month price target of $85, while UBS's Roxanne Meyer gave a 12-month target of $91. "We look for 30+ percent EPS growth over the next few years," she wrote.

At an analyst briefing last week, Lululemon executives laid out an ambitious horizon for growing the chain's geographic footprint, adding more types of apparel and expanding men's offerings. 

"They don't make a lot of mistakes opening stores," said Sam Poser, managing director at Sterne Agee. The company has been conservative so far, with just over 100 stores in the United States. It tends to enter new markets with smaller "showrooms," which blend events and fitness resources into the retail experience. This approach lets it test new markets without having to commit to a large retail space or multi-year lease. 

Operationally, the company is also well-positioned to add more stores, said Credit Suisse analyst Christian Buss. "One of the things that's most interesting is that [CEO] Christine [Day] and the team are really emphasizing an infrastructure for a much larger business," he said. The company is making investments in functions like distribution and information technology that can support a larger geographic footprint, Buss said.

Lululemon has already expanded past its yoga roots with clothes targeting runners, and it's building on that. At the recent analyst day, chief product officer Sheree Waterson presented "Changing the Way People Dress," a slideshow that included a diagram, yoga at the center, with other categories, such as cycling, dance and CrossFit, on spokes surrounding it.

The brand is also targeting male shoppers. Buss said Lululemon is allocating about 20 percent of its store space to men's apparel, which currently makes up only about 12 percent of sales. This "moderate improvement... suggests that they have the right approach," he said. "The velocity of sales is still lagging that of women's," but a new designer and a continued focus on high-tech performance gear should help the brand bridge the gender divide. 

"We definitely envision the men’s line becoming a more significant portion our business and look forward to sharing this exciting product with our guests," a company spokesperson said via email.

What really got analysts pumped, though, was the prospect of a concept the company spokesperson referred to as "everyday technical apparel." The company says this is still in a very early conceptual stage, but fans of the brand already wear their Lululemon gear pretty much everywhere, so the idea of deliberately taking its offerings out of the yoga studio or running track is already creating buzz in the investment community. 

"I think people are wearing it as streetwear already so if you can put the same underlying product thoughts under something that looks more appropriate in a casual workplace, then you have a whole new audience," said Jaime Katz, an equity analyst at Morningstar.

The one cautionary note some analysts have sounded is in regards to the company's stock, expressing skepticism that that Lululemon's per-share price could be worth about as much as a pair of its signature pants, even as they give management and operations a thumbs-up. "It's hard to ignore that it's trading at pretty expensive multiples," Katz said.

Paul Lejuez of Nomura Securities gave the stock a price target of $55, noting "valuation seems lofty" in a recent research note, although he also said, "Overall, it is hard not to be impressed with how this company has established dominance in a category that did not previously exist."