Lululemon Surges 10% on Strong Earnings and Enhanced Buyback Plan
International growth and a $1 billion share repurchase program helped investors look past a sales slowdown in the company's core North American market.
Shares of Lululemon Athletica Inc. (LULU) jumped more than 10% on Thursday after the athletic apparel maker delivered third-quarter earnings that significantly outpaced analyst expectations and announced a major boost to its stock buyback program.
The Vancouver-based company’s stock rose to approximately $206 a share in morning trading, a day after it reported robust financial results for the period ending in the fall. The surge added over $2 billion to Lululemon's market capitalization, signaling strong investor confidence in its global strategy despite some softness in its domestic market.
For its third fiscal quarter, Lululemon reported diluted earnings per share of $2.59, handily beating the analyst consensus estimate of $2.21. Total net revenue grew 7% year-over-year to $2.6 billion. Alongside the strong results, the company authorized a $1 billion increase to its share repurchase program, reinforcing its commitment to returning capital to shareholders.
"Our third-quarter results demonstrate the ongoing momentum of our business globally," said Calvin McDonald, Lululemon's chief executive officer, in a statement. "We are pleased with our performance as we continue to drive product innovation and build enduring relationships with our guests."
A deeper look at the results reveals a story of geographic divergence. The company's international segment was the primary growth engine, with revenue soaring 33%. Growth in China was particularly strong, with a 46% increase, signaling that the brand continues to resonate powerfully in key overseas markets. This strength abroad, however, stood in contrast to a 5% decline in comparable sales in its more mature North American market.
That domestic slowdown caught the attention of analysts, but the robust international performance and shareholder-friendly capital allocation appeared to assuage most concerns. The company also raised its full-year earnings and revenue guidance, projecting confidence heading into the crucial holiday shopping season.
Wall Street's reaction was broadly positive, though some analysts remain measured. BTIG Research reiterated a "Buy" rating on the stock, maintaining an optimistic price target of $303. More cautiously, Bank of America Securities raised its price objective to $220 from $185 but kept its "Neutral" rating, balancing the strong quarter against the North American sales dip. Similarly, Telsey Advisory Group lifted its target to $215 while holding a "Market Perform" rating.
The results and subsequent stock rally come at a pivotal moment. The company has navigated a complex consumer environment where shoppers, particularly in the U.S., have become more selective with discretionary spending. Lululemon also announced a CEO succession plan, adding another layer for investors to watch in the coming year. For now, the successful navigation of global crosscurrents and a clear commitment to shareholder returns have put the company on a strong footing as it closes out the year.