Lululemon Resumes Share Buyback; Shares Rise 3%

Lululemon Athletica announced the resumption of its stock buyback program sending shares up 2.9%. The athletic apparel maker’s buyback program, which is due to expire on January 31, 2021, has $263.6 million worth of stock to be repurchased.

Lululemon (LULU) temporarily halted its share repurchase program in April due to the COVID-19 pandemic in move to preserve capital. The company had also cut executives’ compensation by 20% for three months due to financial impact of the pandemic.

Earlier this month, Lululemon reported a 2% increase in 2Q revenues to $902.9 million, topping the Street consensus of $842.5 million. Online sales surged 157% year-over-year as shoppers shift to online purchases during the pandemic. Its adjusted earnings of $0.74 per share also topped analysts’ expectations of $0.55 per share. However, the retailer was “cautiously optimistic” for the second half of the year, amid a continued uncertain environment. (See LULU stock analysis on TipRanks).

On Sept. 14, Argus Research analyst John Staszak raised the stock’s price target to $380 (18.9% upside potential) from $360 and maintained a Buy rating. He believes that Lululemon’s prospects “are among the best in the apparel sector,” given growing e-commerce sales and “substantial” expansion opportunities outside North America, particularly in China. The analyst expects the shift to higher margin e-commerce sales and favorable operating leverage to lead to higher operating margins over the next several years.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 18 Buys versus 10 Holds. The average price target of $379.07 implies upside potential of 18.6% to current levels. Shares are up about 39% year-to-date.

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