Lululemon rallies as international growth story gains traction
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Lululemon Athletica (NASDAQ:LULU) held on to its big post-earnings gain and was up 12.45% at 12:50 p.m. on Friday. The athletic apparel juggernaut surprised with a strong Q1 earnings report and guidance raise that did not feature any of the consumer demand warnings seen across the retail sector.
Investors also were given an update on international growth. Lululemon (LULU) said it plans to open 30 to 35 new stores in global markets in 2023, mostly in China. Overall, international expansion is a big focus of the company and is likely to continue to grow after accounting for just 16% of total revenue in 2022.
"We have a target to quadruple our business outside North America between 2021 and 2026. This will be driven predominantly by our existing markets, but we'll be entering some exciting new markets as well," noted CEO Calvin McDonald on the earnings call.
Following the report, William Blair reiterated an Outperform rating on Lululemon (LULU). Analyst Sharon Zackfia pointed to strong brand momentum and compelling valuation even after the rally.
"Lululemon's aftermarket valuation represents a 10%-plus discount to more mature and slower-growing Nike (NKE $103.63), leaving room for potential valuation expansion and strong EPS growth to yield still-significant near- and long-term appreciation from aftermarket stock levels (regaining lululemonâs 2019 valuation would yield 30%-plus upside from current levels over the next 6 to 9 months)."
Elsewhere, Oppenheimer analyst Brian Nagel and team pointed to the decidedly solid fundamental trends at LULU as a clear indication of a brand that continues to resonate well with an expanding base of core consumers. The management team and business model are noted to be navigating a choppy, uncertain consumer backdrop. Oppenheimer remained upbeat on prospects for athleisure as a whole and tagged LULU as its top pick within the space.
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