What we think about lululemon athletica (LULU)

Lululemon in Three Words: Recession-Resistant Retailer

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Background

Ironic as it might be, Lululemon's expensive yoga athletic apparel has been quite resilient to this year's challenging macroeconomy.

One might expect that rising inflation would lead consumers to pull back on their discretionary spending, yet Lululemon reported another impressive quarter. Revenue rose 19% to $2.2 billion in the most recent third quarter, led by a jaw-dropping 9% increase in comparable same-store sales. Direct-to-consumer purchases -- mostly coming from its lululemon website rose 19% and now represents 41% of total sales.

Lululemon is stretching itself to achieve its "Power of Three x 2" growth plan, which calls for a doubling of its 2021 net revenue of $6.25 billion to $12.5 billion by 2026. The three pillars of the plan are product innovation, guest experience, and market expansion. It's also looking to double the sales of its men's segment, double its direct-to-consumer business, and quadruple its international net revenues relative to 2021.

While that might sound ambitious in a difficult economy, Lululemon has success while being underestimated many times before. Management reiterated its confidence by buying back $210 million of stock in the third quarter, while also minting a new $1 billion buyback authorization. With a recent market cap of $62 billion, that would repurchase just less than 2% of its outstanding shares.

Lululemon has been one of the best-dressed and best-performing stocks of the retail world. It looks like a healthy option for any growth-oriented portfolio.

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