Future Tech

Lululemon shares surge as consumers snap up pricier athletic wear

Tan KW
Publish date: Fri, 02 Jun 2023, 10:32 PM
Tan KW
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Future Tech

BENGALURU Shares of Lululemon Athletica Inc soared 15% in premarket trading on Friday (June 2), after the premium apparel retailer defied investor worries with a full-year outlook lift amid little pullback from consumers and a sharp rebound in China sales.

The rosy outlook comes in contrast to the general trend of US retailers ranging from Macy's to Dollar General warning of weak discretionary spending by American consumers.

At least 11 brokerages raised price targets on the company, with Piper Sandler hiking by the highest margin to US$445 , above the median of US$424.

"We think (Lululemon) is one of the select brands continuing to drive outsized demand in this more challenging macro environment with innovation and newness," said Abbie Zvejnieks, analyst at Piper Sandler.

Lululemon's first-quarter results also moved past estimates as the company saw traffic across both its stores and online up about 30%. The company also reported a 79% rise in sales in China, bolstered by the rollback of Covid-19 restrictions.

Lululemon's exposure to China could be "a solid source of sales and margin upside for the rest of the year," analysts at Barclays wrote in a note.

A loyal customer base has also given the company a leg up, helping it sell more of its popular products, such as the Align high-rise yoga pants which retails between US$98 and US$118, at full price, even amid an uncertain economy.

"Lululemon's stores continue to be a key catalyst for customer retention and acquisition," analysts at TD Cowen wrote in a note.

The company's strong results also lifted shares of other athletic wear makers including Nike Inc and Athleta owner Gap Inc by 3% and 1%, respectively, in premarket trading. Shares of European sportswear companies Adidas and Puma were also up.

"We continue to believe that Lululemon is best positioned in a consumer slowing cycle," said Adrienne Yih, analyst at Barclays.


  - Reuters


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