Why Lululemon Shares Popped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of yoga outfitter lululemon athletica (Nasdaq: LULU  ) were doing backflips today, gaining 13% after the company posted a strong earnings report.

So what: Adjusted profit grew to $0.34 per share, or $0.39 with a $7.2 million tax adjustment factored in. Analysts had expected $0.31, but their revenue expectations matched the apparel seller's total of $282.6 million on 33% growth. Same-store sales also bumped up by a healthy 15%, and the company increased guidance for the year.

Now what: It's hard to doubt Lululemon's prowess as a company as it continues to put up strong growth numbers while many of its rivals struggle, but the stock may be ready for a breather. The share price has jumped 40% in just over a month and now sits just a few points away from its all-time high of $81.09. Its P/E ratio is also back near 60. Looking ahead, investors will want to keep an eye on the spread of Lululemon's Ivivva chain for girls, as well as the threat from Gap's imitation brand, Athleta.

Can't get enough Lululemon? Add the yoga sensation to your Watchlist.

Fool contributor Jeremy Bowman holds no positions in the companies in this article. The Motley Fool owns shares of lululemon athletica. Motley Fool newsletter services have recommended buying shares of lululemon athletica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

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  • Report this Comment On September 10, 2012, at 3:59 PM, TMFPennyWise wrote:

    Good article. Lulu's PE scares me a little. But I do like their designs!

    GAP Athleta is selling like crazy--they are putting their select 'yoga wear' stores in next to or across from Lulu's in many of the big malls and are seeing lots of traffic according to my sources. So I am looking for GPS' numbers to be strong as they build out thru out the nation.

    My thrifty (?!) daughters buy one Lulu piece and then buy Athleta for the rest of the ensemble.

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