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Why Shares of Lululemon Athletica Were On the Rise Today

By John Rosevear - Mar 19, 2020 at 4:31PM

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Maybe the retail apocalypse won't be quite as bad as feared.

What happened

Shares of lululemon athletica (LULU -2.00%) closed higher on Thursday, after investors began snapping up bargains among beaten-up retail stocks following a somewhat optimistic note from an influential analyst team.

At 4 p.m. EDT, Lululemon's shares were up about 10.4% from Wednesday's closing price.

So what

Like most retailers, Lululemon's had had a rough couple of weeks. The company's stock fell sharply on Monday, after it said that it is closing all of its stores in North America through at least March 27 in response to the novel coronavirus pandemic.

But maybe things won't be quite as bad as investors have feared. A note published Thursday by a team of Cowen analysts led by Oliver Chen tried to put some ballpark estimates around the likely impact of the pandemic on retailers -- and that impact might not be so bad.

Inside a Lululemon store.

Image source: Lululemon Athletica.

Simply put, Chen and his team think that March will be bad and April will be terrible, but things could start to get better fairly quickly after that. For the full year, they see an average 12% year-over-year decline in sales for the retailers they follow. That's not great, but it's also not the apocalypse that some investors have feared.

Given that Lululemon remains a well-run company with solid growth potential, it's not surprising that investors were jumping back in on Thursday.

Now what

Those new shareholders won't have to wait too long to hear from Lululemon's management team: The company is scheduled to report its quarterly earnings next Thursday, March 26. I expect we'll get a better idea of the business's outlook then.

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