Lululemon Jumps to the Top of the S&P 500 After Earnings

lululemon signage seen outside of department store in New York City

(Image credit: Michael M. Santiago/Getty Images)

Lululemon Athletica (LULU) is the best S&P 500 stock Friday after the athleisure retailer beat top- and bottom-line expectations for its fiscal third quarter and raised its full-year outlook.

In the quarter ended October 27, Lululemon's revenue increased 8.7% year over year to $2.4 billion, driven by a 33% surge in international revenue. Its earnings per share (EPS) were up 13.4% from the year-ago period to $2.87.

"Our performance in the third quarter shows the enduring strength of Lululemon globally, as we saw continued momentum across our international markets and in Canada," said Lululemon CEO Calvin McDonald in a statement. "Looking to the future, we are pleased with the start to our holiday season, and we remain focused on accelerating our U.S. business and growing our brand awareness around the world."

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The results beat analysts' expectations. Wall Street was anticipating revenue of $2.36 billion and earnings of $2.69 per share, according to CNBC.

As a result of its strong performance in the third quarter, Lululemon raised its full-year outlook. Here's what the company now expects to accomplish in its fiscal year compared to its previous forecast:

Swipe to scroll horizontally

Metric	Updated outlook	Prior outlook
Revenue	$10.452 billion to $10.487 billion	$10.375 billion to $10.475 billion
Earnings per share	$14.08 to $14.16	$13.95 to $14.15

The new outlook came in ahead of analysts' expectations. Specifically, Wall Street is forecasting revenue of $14.44 billion and earnings of $13.97 per share.

For its fiscal fourth quarter, Lululemon said it anticipates revenue in the range of $3.475 billion to $3.51 billion and earnings per share of $5.56 to $5.64. Analysts are guiding for revenue of $3.5 billion and earnings of $5.59 per share.

Is Lululemon stock a buy, sell or hold?

Lululemon had a rough start to 2024, but shares bottomed over the summer and have been trending higher since. And Wall Street thinks brighter days are in store for the consumer discretionary stock. According to S&P Global Market Intelligence, the consensus recommendation among the 36 covering analysts it tracks is a Buy.

However, analysts' price targets have failed to keep up with the recent surge in LULU’s stock. Indeed, shares are up nearly 16% today and more than 70% since August 1. The average price target of $356.38 sits at a discount to current trading levels which could prompt some price-target hikes if the retail stock's rally continues.

William Blair analyst Sharon Zackfia is one of those with an Outperform (Buy) rating on Lululemon "given the strength of the brand, international momentum, and significant opportunity to grow domestic brand awareness."

The analyst says that "efficiencies and benefits from changes to its product organization to better balance design and merchandising" have Lululemon "on track to return to historical levels of product freshness no later than spring 2025." She also calls the company's fourth-quarter guidance "conservative" and "beatable."

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Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.