Published - June 2nd, 2023 @ 5:08 PM (CET)

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Lululemon's Strong Outlook and Sales Rebound Boosts Shares
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Shares of Lululemon Athletica (NASDAQ:LULU) Inc witnessed a significant 15% surge in premarket trading on Friday. The premium apparel retailer defied investor worries by raising its full-year outlook, supported by little pullback from consumers and a sharp rebound in China sales.

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U.S. Retailers Face Consumer Demand Concerns Amid High Inflation
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While U.S. retailers, including Macy's (NYSE:M) and Dollar General (NYSE:DG), have been cautioning about weakening consumer demand due to persistently high inflation, Lululemon's positive outlook comes as a breath of fresh air.

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Price Targets Raised as Lululemon Outperforms Expectations
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At least 10 brokerages have raised their price targets for Lululemon, with Piper Sandler leading the pack by increasing its target to $445, surpassing the median target of $424. Analyst Abbie Zvejnieks from Piper Sandler believes Lululemon is one of the select brands driving outsized demand in the current challenging macro environment through innovation and newness.

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Lululemon's First-Quarter Results Beat Estimates with Impressive Growth
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Lululemon's first-quarter results surpassed expectations, with both in-store and online traffic increasing by about 30%. The company also reported a remarkable 79% rise in sales in China, benefitting from the easing of COVID restrictions. Analyst Zvejnieks added that strong guest metrics from the first quarter continued into the second quarter.

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Positive Results Extend to Other Athletic Wear Companies
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The strong results from Lululemon also had a positive impact on other athletic wear makers. Shares of Nike Inc (NYSE:NKE) and Under Armour (NYSE:UA) experienced gains of 3% and 1.3% respectively in pre-market trading. European sportswear companies Adidas (OTC:ADDYY) and Puma also witnessed a rise in their shares.

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Lululemon's Valuation and Strong Fundamentals Stand Out in the Industry
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Lululemon's forward price-to-earnings multiple (P/E), a common benchmark for valuing stocks, stands at 26.35, higher than its industry peers Nike and Under Armour, which have P/E ratios of 25.40 and 13.79 respectively. Analyst Alex Straton from Morgan Stanley (NYSE:MS) asserts that Lululemon's impressive fundamentals, both on a standalone basis and relative to peers, indicate its ability to navigate macroeconomic challenges effectively.

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