Clothing retailer Lululemon (NASDAQ:LULU) was already having a pretty good day after rolling out its earnings report, but that’s not the only thing keeping shares aloft. BTIG, via analyst Janine Stichter, just came out strongly in Lululemon’s favor, saying that it “has a handle” on the issues accompanying its U.S. sales decline. Those two factors helped propel Lululemon up over 5.5% in Thursday afternoon’s trading.
The combination of decent earnings and an increase in the share buyback plan drove shares up, but Stichter pointed out a little more that didn’t hurt – international sales were “extremely strong.” That was good news given the American business, which was in a slump, but not as much of a slump as was initially feared.
Rising Competition
After Lululemon made such a splash—particularly during the pandemic, as athleisure wear took off thanks to people no longer having to wear the same basic set of clothes to work every day—it really wasn’t surprising to see other companies pile in and give Lululemon a run for its money. Worse, consumer tastes started to shift away from the skin-tight look that gave Lululemon its fame into pretty much the complete opposite, with Gen Z increasingly preferring loose fits and baggy looks.
But with plans afoot to refresh the line with more sizes and colors, as well as a brand new chief product officer, it’s a safe bet that a greater diversity of products will follow. That’s a strategy not without risk—too many products can get in the way and increase carrying costs—but it can also pay off as customers are better able to find what they want.
Is LULU a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LULU stock based on 17 Buys, four Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After an 8.02% loss in its share price over the past year, the average LULU price target of $434.62 per share implies 33.07% upside potential.
