Is Lululemon Stock a Buy?

By The Motley Fool4 days ago

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Investors were cautiously optimistic heading into the fourth-quarter earnings report from lululemon athletica (NASDAQ: LULU). While they expected strong sales growth to close out fiscal 2020, shareholders were worried about rising costs and inventory pressures that might have slowed profit gains. The yoga apparel specialist's stock also followed Nike (NYSE: NKE) lower after the footwear giant posted weak holiday season revenue.

Lululemon's Q4 results, released on March 30, settled most of those questions in a positive light. As a result, investors have some good reasons to buy this stock even if it looks expensive compared to Nike and other peers.

Lululemon is producing market-beating growth

Owning Lululemon stock gives an investor a level of growth that's hard to find on the market. The company's Q4 results showed off that performance, as sales jumped 24% thanks to booming demand in the e-commerce channel.

Image source: Getty Images.

Nike is capitalizing on the same favorable demand trends for athleisure wear, but its expansion pace is weaker. Nike sales are up 4% over the past nine months, while Lululemon's revenue rose 11% in the fiscal year that ended in early February. That double-digit spike looks more impressive when you consider that it happened through several weeks of retailing closures followed by months of restricted customer traffic at its stores.

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