A better-than-expected earnings report sent the stock surging, but shares of Lululemon Athletica are underwater for the year. The stock is down 4.8% year to date, but it is up 8.2% compared to the rest of the market.
Lululemon is still on offense despite near-term economic uncertainty. Three highlights from the quarter should encourage investors to buy and hold this top retail stock.
The fiscal fourth-quarter revenue increased 23% on a two-year compounded basis. For the first time, total revenue exceeded $6 billion. In fiscal 2015, revenue grew 15% to reach $2.1 billion, but Q4's rate of growth is higher than that.
Peter Lynch was looking for promising growth stories in retail that continued to get better as a company executed its growth strategy, and the consistency of the growth of Lululemon would have appealed to him.
The image is from the same source.
The guest response to the new women's footwear line from Lululemon has exceeded expectations.
Lululemon believes it has an opportunity to make a big splash in the market by going after the women's market first.
Chief Product Officer Sun Choe explained in a press release that the new shoe line was started with women in mind because they saw an opportunity to solve the problem of performance shoes being designed for men and then adapted for women.
Next year, the company plans to use the same approach for men and women.
YCharts has LULU data.
It has been a success story since it was founded with a single store in a yoga studio.
The athletic wear industry has a revenue of over $200 billion a year. Calvin McDonald explained on the earnings call that the category strength of athletic apparel continues to outpace growth in overall apparel.
It is a relatively low-risk investment. The brand has grown for 20 years and is showing universal appeal as it expands from China to Europe. Over the next 20 years, investors who buy and hold this retail stock should beat the market average return.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool owns and recommends Lululemon Athletica. The Motley Fool has a disclosure policy. score=27.7>
John Ballard has no position in any of the mentioned stocks. The Motley Fool has a recommendation for Lululemon Athletica. There is a disclosure policy for The Motley Fool.
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