The downturn in shares of Lululemon (LULU) is likely over. In the last quarter, the retailer posted third-quarter results. Revenue grew while its diluted earnings per share fell.
Lululemon posted total revenue of $2.6 billion, up by 7% Y/Y. Diluted EPS fell by 10% to $2.59. Accessories and other revenue led the product innovation growth (12%). Men’s apparel (+8%) and women’s apparel (+6%) followed.
Ahead of the report, LULU stock found support levels at around $160. It bottomed in the the $160 - $177 range before breaking out after the Q3 report. Last Friday, shares closed at $209.45.
LULU stock still commands a valuation premium, even though growth is absent. The firm is profitable.
Catalyst
Elliot unveiled an over $1 billion stake on Dec. 18, according to The Wall Street Journal. The activist is in a good position to steer the struggling retail toward accelerating growth. That starts with strong leadership. Elliott may influence management to hire a strong Chief Executive Officer.
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Nike (NKE) has similar struggles. The sports apparel firm trades at a premium; growth is absent, but profitability remains. In its second quarter, Nike earned $0.53 in GAAP EPS. Revenue of $12.4 billion is up by 0.4%. The firm posted wholesale revenue of $7.5 billion (+8%). NIKE Direct revenue fell by 8% Y/Y to $4.6 billion.
Between the two firms, Lululemon is the more attractive pick.
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