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Why lululemon athletica Stock Gained 18% in April

By Demitri Kalogeropoulos – May 4, 2020 at 9:36AM

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The athleisure retailing business was booming before COVID-19 struck.

What happened

Its stores were closed, but lululemon athletica (LULU 5.38%) stock still outperformed a strong market last month. Shares rose 18% compared to a 13% increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

The stock remains lower on the year, but its 7% decline in 2020 to date is more modest than the broader market's slump.

So what

Like most of its peers, Lululemon's physical store footprint was closed across key markets last month. In April, the chain also announced the surprise departure of its chief financial officer, who is leaving to head up another retailer.

Yet investors have been more focused on its strong momentum heading into the pandemic, with sales, gross profit margin, and operating profit margin all improving markedly in fiscal 2019.

Now what

Lululemon's next earnings report, in the summer, will likely show a significant impact from COVID-19 and the related store closures. There should be bright spots in that report, too, including a booming e-commerce channel and sales rebounds in markets that have seen the virus threat fully pass.

The stock's returns from here will largely depend on whether investor optimism has been well placed, and whether world economies bounce back quickly from the recession that has been fueled by social distancing mandates.

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. The Motley Fool has a disclosure policy.

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Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$307.80 (5.38%) $15.70

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