Published - June 2nd, 2023 @ 5:08 PM (CET)
Lululemon's Strong Outlook and Sales Rebound Boosts Shares
Shares of Lululemon Athletica (NASDAQ:LULU) Inc witnessed a significant 15% surge in premarket trading on Friday. The premium apparel retailer defied investor worries by raising its full-year outlook, supported by little pullback from consumers and a sharp rebound in China sales.
U.S. Retailers Face Consumer Demand Concerns Amid High Inflation
While U.S. retailers, including Macy's (NYSE:M) and Dollar General (NYSE:DG), have been cautioning about weakening consumer demand due to persistently high inflation, Lululemon's positive outlook comes as a breath of fresh air.
Price Targets Raised as Lululemon Outperforms Expectations
At least 10 brokerages have raised their price targets for Lululemon, with Piper Sandler leading the pack by increasing its target to $445, surpassing the median target of $424. Analyst Abbie Zvejnieks from Piper Sandler believes Lululemon is one of the select brands driving outsized demand in the current challenging macro environment through innovation and newness.
Lululemon's First-Quarter Results Beat Estimates with Impressive Growth
Lululemon's first-quarter results surpassed expectations, with both in-store and online traffic increasing by about 30%. The company also reported a remarkable 79% rise in sales in China, benefitting from the easing of COVID restrictions. Analyst Zvejnieks added that strong guest metrics from the first quarter continued into the second quarter.
Positive Results Extend to Other Athletic Wear Companies
The strong results from Lululemon also had a positive impact on other athletic wear makers. Shares of Nike Inc (NYSE:NKE) and Under Armour (NYSE:UA) experienced gains of 3% and 1.3% respectively in pre-market trading. European sportswear companies Adidas (OTC:ADDYY) and Puma also witnessed a rise in their shares.
Lululemon's Valuation and Strong Fundamentals Stand Out in the Industry
Lululemon's forward price-to-earnings multiple (P/E), a common benchmark for valuing stocks, stands at 26.35, higher than its industry peers Nike and Under Armour, which have P/E ratios of 25.40 and 13.79 respectively. Analyst Alex Straton from Morgan Stanley (NYSE:MS) asserts that Lululemon's impressive fundamentals, both on a standalone basis and relative to peers, indicate its ability to navigate macroeconomic challenges effectively.
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