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Lululemon Athletica Inc. (LULU), headquartered in Vancouver, Canada, designs, distributes, and retails athletic apparel, footwear, and accessories under the lululemon brand for women and men. Valued at $47.5 billion by market cap, the company produces fitness pants, shorts, tops and jackets for yoga, dance, running, and general fitness.
Companies worth $10 billion or more are generally described as “large-cap stocks,” and LULU perfectly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance within the apparel retail industry. Lululemon's reputation for quality and innovation has built a loyal customer base, driving repeat purchases and positive word-of-mouth. Their consistent R&D investment leads to unique products that set them apart from competitors, allowing control over the customer experience and margins.
Despite its notable strength, LULU slipped 24.4% from its 52-week high of $516.39, achieved on Dec. 29, 2023. Over the past three months, LULU stock gained 45.5%, outperforming the Dow Jones Industrials Average’s ($DOWI) 4.4% gains during the same time frame.
In the longer term, shares of LULU plummeted 23.6% on a YTD basis and 20.5% over the past 52 weeks, considerably underperforming DOWI’s YTD gains of 15.3% and 16.5% returns over the last year.
However, LULU has traded above its 50-day moving average since mid-September. The stock is trading above its 200-day moving average since early December.
LULU has faced challenges with its product launches and a tough market for premium apparel, leading to its underperformance.
On Dec. 5, LULU reported its Q3 results and its shares closed up more than 15% in the following trading session. Its EPS of $2.87 topped Wall Street expectations of $2.69. The company’s revenue was $2.40 billion, topping Wall Street forecasts of $2.35 billion. For Q4, LULU expects revenue in the range of $3.48 billion to $3.51 billion. The company expects full-year EPS to be $14.08 and $14.16, and it expects revenue to range from $10.45 billion to $10.49 billion.
In the competitive arena of athleisure, adidas AG (ADDYY) has taken the lead over LULU, showing resilience with a 24.7% uptick on a YTD basis and 21.4% gains over the past 52 weeks.
Wall Street analysts are moderately bullish on LULU’s prospects. The stock has a consensus “Moderate Buy” rating from the 30 analysts covering it. While LULU currently trades above its mean price target of $382.27, the Street-high price target of $480 suggests an upside potential of 22.9%.
