While athleisure leader Lululemon (LULU) is based in Canada, it turns out that it can beat the tariffs recently established by the Trump administration. .The reason? It is largely a matter of production. And this revelation gave Lululemon a modest boost in share prices in Thursday afternoon’s trading.
As it turns out, while Lululemon is based in Canada, it does most of its production in several Asian countries that have not, as yet, fallen prey to Trump tariffs. Around 90% of Lululemon’s production is done in Vietnam, Sri Lanka, Cambodia, Bangladesh and Indonesia.
And with so many companies already heading to Vietnam to get around China, the end result is, if only for now, a tariff-less environment for Lululemon. It also helps that Lululemon exclusively depends on vendors for its material, working with 49 separate vendors in those various countries. This keeps its supply chain flexible, as well as tariff-beating.
Drawing in the Guys
Lululemon’s big focus has been on female customers for some time now, and it has been trying to turn the males to its operations as well. To that end, it recently hired Lewis Hamilton of Formula One fame as its new brand ambassador.
While some might question how well this will do in getting the guys interested in athleisure, which was largely the province of the ladies, it is clear that Lululemon is at least trying to branch out. Certainly, getting a pro racer to do the job should speak to masculinity, but the idea that one new brand ambassador can break open an entire market by himself seems like a bit of a long shot. Still, if this is just the start, then Lululemon may be on the right track after all.
What is the Target Price for Lululemon?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on LULU stock based on 14 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 22.97% loss in its share price over the past year, the average LULU price target of $422.79 per share implies 19.85% upside potential.
