- Lululemon shares are on pace to open at an all-time high Thursday after the retailer blew past Wall Street’s expectations in its latest fiscal quarter.
- Famous for its women’s leggings and “ABC” jogger pants for men, Lululemon sales have outperformed other retailers during the Covid pandemic.
- But even as consumers emerge from their homes, Lululemon still stands to benefit from shoppers gravitating toward comfort.
Lululemon shares are on pace to open at an all-time high Thursday morning after the retailer blew past Wall Street’s expectations in its latest fiscal quarter and said it’s on track to hit a 2023 revenue target well ahead of schedule.
The athletic apparel maker’s stock surged nearly 13% in premarket trading, adding more than $48 to its stock price, after closing Wednesday at $380.85. Shares last reached an intraday high of $417.85 on Aug. 30. As of Wednesday, Lululemon had gained about 9% year to date, bringing its market value to almost $50 billion.
Famous for its women’s leggings and “ABC” jogger pants for men, Lululemon sales have outperformed other retailers during the Covid pandemic. Consumers have been searching for comfortable pieces to wear while working from home as well as for exercising. Shoppers have spent more money on so-called athleisure styles than dresses, suits and other formal wear.
But the company — and the fashion trend — stands to benefit even as consumers are emerging from their homes and returning to schools and offices.
For its current fiscal year, Lululemon expects revenue to range between $6.19 billion and $6.26 billion, meaning it will surpass a key financial goal roughly two years ahead of schedule.
Chief Executive Calvin McDonald told analysts on an earrings conference call that the retailer will also double its men’s business and quadruple its international segment earlier than expected. It plans to offer up new, long-term financial targets after the 2021 holidays.
McDonald added that Lululemon would be performing “even stronger,” if it weren’t for the supply chain headaches facing the retail industry today.
Cowen & Co. hiked its price target for Lululemon stock to $520 from $476, marking a new high on Wall Street.
According to Cowen retail analyst John Kernan, “Management expressed significant confidence in the pace of its business and being in the early innings of its growth potential across product lines, activities, categories and regions.”
On the heels of Lululemon’s upbeat quarterly results, Telsey Advisory Group also raised its price target on Lululemon stock to $485 from $460. The average price target for Lululemon’s stock is now $434.20, according to FactSet.
While supply chain disruptions, including heightened air freight costs and factory closures in Southern Vietnam, remain headwinds, Lululemon has taken these factors into account in its updated outlook, said Dana Telsey, CEO and chief research officer of Telsey Advisory, in a note to clients.
“The pandemic has accelerated Lululemon’s strategic initiatives and the company appears well-positioned to further capitalize on opportunities in a post-pandemic world,” she said.
Lululemon, which also owns the connected fitness product Mirror, hopes to keep driving growth by launching products in new fabrics, some of which are environmentally friendly. It’s still eyeing greater gains in its men’s business and in key international markets like China.
There have also been rumors that Lululemon will launch into footwear sometime next year, making it a closer competitor to Nike and Adidas.
To be sure, the athletic apparel space is only getting more competitive. Levi Strauss & Co. recently announced its plans to acquire the yoga apparel maker Beyond Yoga. And Wolverine Worldwide — the company behind Merrell, Saucony, Sperry, Stride Rite and other shoe names — recently scooped up Lululemon rival brand Sweaty Betty for $410 million.
—CNBC’s Michael Bloom contributed to this reporting.
Source: Business - cnbc.com
