Lululemon Beats Bleak Retail

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What's going on?

OMG! High-end athletic retailer Lululemon seems to be bucking the trend of struggling athletic apparel companies after it posted better-than-expected sales and profits for the second quarter of 2017. Shares in the company jumped by 7% on Friday!

What does this mean?

Investors appeared to focus on the companys 7% sales growth and, especially, the strength of its online sales, which jumped 30% in the last year (the Amazon effect is a worry for every investor in retail).


Those earnings are in pretty strong contrast to recently reported results from other athletic retailers, like Under Armour and Foot Locker, which are suffering from more competition (largely from ecommerce). Lululemon, however, appears to be doing a better job of managing the headwind, partly with an improving ecommerce offering of its own.

Why should I care?

For markets: Retailers have had a rough summer, but there are signs that they are recovering a bit.

Stocks of retail companies have been among the worst performers this summer as competition continues to ramp up and the shift to ecommerce remains a challenge (thanks, in large part, to Amazon). However, Lululemons strong performance helped stocks of most US retailers have a good day on Friday. Also, L Brands (the owner of Victorias Secret) saw its stock jump almost 4% after reporting its August sales numbers. Retailers still face an uphill battle in the years to come, but their stock prices have sold off so much that they may already be reflecting that now.



The bigger picture: Lululemon thinks its premium brand will keep it safe from the ecommerce threat.

According to its CEO, Lululemons brand is strong enough that people will be willing to shell out lots of cash to buy sporty clothes with the Lululemon logo just having a cheaper generic ordered from somewhere online simply wont suffice. Lululemons ecommerce success suggests hes being proven correct. Its a strategy that could also benefit other strong premium brands, in clothing and in other consumer-facing industries.

Originally posted as part of the Finimize daily email.

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