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Lululemon Resumes Share Buyback; Shares Rise 3%

Lululemon Athletica announced the resumption of its stock buyback program sending shares up 2.9%. The athletic apparel maker’s buyback program, which is due to expire on January 31, 2021, has $263.6 million worth of stock to be repurchased.

Lululemon (LULU) temporarily halted its share repurchase program in April due to the COVID-19 pandemic in move to preserve capital. The company had also cut executives’ compensation by 20% for three months due to financial impact of the pandemic.

Earlier this month, Lululemon reported a 2% increase in 2Q revenues to $902.9 million, topping the Street consensus of $842.5 million. Online sales surged 157% year-over-year as shoppers shift to online purchases during the pandemic. Its adjusted earnings of $0.74 per share also topped analysts’ expectations of $0.55 per share. However, the retailer was “cautiously optimistic” for the second half of the year, amid a continued uncertain environment. (See LULU stock analysis on TipRanks).

On Sept. 14, Argus Research analyst John Staszak raised the stock’s price target to $380 (18.9% upside potential) from $360 and maintained a Buy rating. He believes that Lululemon’s prospects “are among the best in the apparel sector,” given growing e-commerce sales and “substantial” expansion opportunities outside North America, particularly in China. The analyst expects the shift to higher margin e-commerce sales and favorable operating leverage to lead to higher operating margins over the next several years.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 18 Buys versus 10 Holds. The average price target of $379.07 implies upside potential of 18.6% to current levels. Shares are up about 39% year-to-date.

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Amit Singh
Amit Singh jumped into the world of stock analysis and investing after completing his Post Graduate Diploma in Finance in 2009. Before joining TipRanks in 2020, he worked as an equity research analyst for eight years. With a keen eye for identifying strategic investment opportunities, his work entails evaluating stocks, building financial models, writing company-specific research reports, and identifying the overall financial worth of companies in the consumer staples and technology sectors. In 2017, Amit found a way to combine his expertise in evaluating companies with his passion for writing. He has also worked with the financial research firm Market Realist.

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