Shares of apparel company Lululemon Athletica (LULU 15.89%) shot up on Friday after the company provided a solid financial report for its third quarter of 2024 and raised its full-year guidance. As of 3 p.m. ET, Lululemon stock was up 16%.
Lululemon’s growth and profits were higher than estimates
It’s been a good earnings season for apparel stocks, generally speaking, but I don’t wish to take anything from Lululemon. Its Q3 report was strong, showing a 9% year-over-year increase in revenue, which hit $2.4 billion. For its part, management expected revenue closer to $2.3 billion.
The financial report from Lululemon was praised by most in the professional analyst community, with many increasing their price targets for the stock. When this happens, investors tend to pay attention.
Lululemon also updated aspects of its full-year guidance, considering Q3 sales were better than expected. Previously, it expected 8% to 9% full-year top-line growth, and now it expects growth to come in at 9%. Management anticipates the bottom-line numbers to be toward the higher end of its previous guidance as well.
Lululemon is still looking to the long term
In 2022, Lululemon’s management laid out a plan to double its revenue by 2026. The plan implied an aggressive 15% compound annual growth rate (CAGR). But the business is well on track, much to the delight of its shareholders. Revenue for 2024 should be close to $10.5 billion and needs to reach $12.5 billion by 2026. That’s less than 10% growth in each of the next two years.
In conclusion, Lululemon has a credible management team, and that’s important for investors who trust what a company’s leadership has to say. Moreover, the management team takes care of its shareholders, as evidenced by just adding $1 billion to its buyback plan. In other words, things are still looking good for Lululemon’s business, and the big jump in the stock price today seems justified to me.
Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.
