MW Lululemon's stock jumps as strong holiday sales show demand is improving

By Tomi Kilgore

Stock extends surge above Wall Street's target after profit, revenue and gross margin outlook were raised

Shares of Lululemon Athletica Inc. were running higher early Monday trading after the yoga and athletic-gear maker boosted its earnings outlook for the fiscal fourth quarter in the wake of a strong holiday shopping season.

The rally and the upbeat earnings outlook provide investors with hope that a real turnaround may now be in place, after the stock $(LULU)$ had tumbled 25.2% in 2024 while the S&P 500 index SPX ran up 23.3%.

In Monday's premarket, the stock climbed 2.7%, to put it on track to open around the highest prices since March 21, 2024. It was also trading more than 4% above the average price target of the 37 analysts surveyed by FactSet who cover the stock, which was $390.23.

"During the holiday season, our guests responded well to our product offering, enabling us to increase our fourth quarter guidance," said Chief Financial Officer Meghan Frank.

For the quarter that runs through January, the company raised its guidance range for earnings per share to $5.81 to $5.85 from $5.56 to $5.64 and for revenue to $3.56 billion to $3.58 billion from $3.475 billion to $3.51 billion.

The new guidance ranges are above the FactSet consensus for EPS of $5.66 and revenue of $3.47 billion.

Lululemon also said it now expects gross margin to improve by 30 basis points, or 0.3 percentage points, from a year ago, compared with previous guidance of a decrease of 20-to-30 basis points.

Truist analyst Joseph Civello wrote in a note to clients on Friday that he expected a "positive pre-announcement" from Lululemon.

Civello had said Friday that he believed the stock's underperformance over the past year had created an "attractive entry point" for investors, especially given the growing momentum in Truist's card data and TikTok trends.

"As [Lululemon] continues to execute on bringing more newness into its assortment, we expect demand trends to continue to improve," Civello wrote, which combined with easier year-over-year comparisons makes him "very bullish" on 2025 opportunities.

He raised his stock price target to $460 from $420.

His new target implies about 16% upside from Friday's close, and is about 18% above the average analyst price target of $390.23.

-Tomi Kilgore

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January 13, 2025 08:48 ET (13:48 GMT)

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