4. Lululemon Athletica Inc. (NASDAQ:LULU)
Average Upside Potential: 23.40%
Number of Hedge Fund Holders: 45
Lululemon Athletica Inc. (NASDAQ:LULU) designs and retails athletic clothing products. It offers a range of products for both men and women, including yoga pants, tops, jackets, and accessories, and is known for its innovative designs, comfortable fabrics, and commitment to sustainability. It sells through sold through different channels, including direct-to-consumer via e-commerce, company-operated stores, outlets, sales to wholesale accounts, recommence, license and supply arrangements, and sales from temporary locations. It also operates Lululemon Studio, which offers in-home connected fitness and related content subscriptions.
The second quarter of fiscal 2025 at the company saw a revenue growth of 7.33% year-over-year. Sales of men’s clothing increased by 11%, women’s by 6%, and accessories by 7%. It also bought back $584 million of its own stock in Q2, bringing the total to $1.2 billion this year. The total revenue generated was $2.37 billion.
The company is doing especially well in Asia. In China, revenue increased by 34% year-over-year. Some mistakes with products and inventory have slowed down innovation. It’s expected to grow its international revenue by 4x by the end of 2026. In the last quarter, international revenue grew by 29%, or 31% when adjusted for currency changes. It’s now working on new styles of tops, shorts, and tracksuits for 2025 to help it return to its previous level of new products before next spring.
It’s trying to double its sales from men’s clothing, online sales, and international sales by 2026, as a part of its plan called “Power of Three ×2.” It has a lot of cash and has reduced its inventory, which is good for future growth. As Lululemon Athletica Inc. (NASDAQ:LULU) continues expanding outside of North America, it is well-positioned for continued growth in the athleisure market. Despite recent challenges, it seems to have a promising future.
Middle Coast Investing stated the following regarding Lululemon Athletica Inc. (NASDAQ:LULU) in its Q2 2024 investor letter:
“I mentioned last quarter and higher above that I like buying quality stocks on sale. Lululemon Athletica Inc. (NASDAQ:LULU), the 2nd worst performer in the S&P 500 this year, qualifies. I published a full thesis on the stock before its most recent earnings, but the basics: the yoga pants and clothing company has had an amazing post pandemic run that is approaching its end. Its growth in the U.S. is slow/non-existent at the moment, but it is growing very fast in China and Europe. I think that international growth is likely to endure, and that its U.S. slowness is likely to be temporary. Lululemon shares are not ‘cheap’, but they are on sale for an average price, and I think the company will grow faster than average over the next five years. I would be wrong if Lululemon is a fad gone bust, or faces a huge post-pandemic hangover as people get used to leaving the house more. We’ll see.”
