Investors should invest in Lululemon Athletica Inc (NASDAQ: LULU) on the post-earnings decline, according to Dana Telsey. She’s the chief executive of Telsey Advisory Group.
LULU may have missed expectations with its future guidance last night, but the numbers, in and of themselves, were not as bad as the market is perceiving them to be, she said in an interview today.
Including today’s crash, Lululemon stock is down nearly 30% versus its year-to-date high.
Customers are responding to LULU’s new products
Lululemon topped estimates on the top and bottom lines in its fiscal Q4.
The athleisure retailer’s gross margin also came in better than expected in its recently concluded quarter.
Telsey remains positive on LULU as it witnessed some improvement in the US in its fourth quarter and the momentum is expected to carry through in 2025.
While traffic, much like the rest of the industry, has taken a hit since the start of this year, customers are still responding positively to new products and innovations, bringing confidence on what the future holds for Lululemon, the company’s management told investors on the earnings call.
Plus, the Canadian giant is aggressively repurchasing stock to create more value for its shareholders as well.
It bought back about $1.6 billion worth of its stock in Q4 and authorised another $1 billion in repurchase last night.
Lululemon can weather the new tariffs environment
Dana Telsey is bullish on Lululemon shares also because the retailer is among the least exposed to higher tariffs under the Trump administration.
Additionally, even if it sees a slowdown in the US, the multinational has ample room for growth elsewhere.
Brand awareness internationally, including in the large economies like France, Germany, and Japan currently sits in low single digits, which LULU said it’s committed to improving with marketing and ambassador relationships.
Moreover, China is emerging as an increasingly important market for Lululemon Athletica as well.
Together, these countries could help drive significant growth for the retailer moving forward.
LULU shares have upside to $445 in 2025
Lululemon guided for up to 7.0% increase in sales for 2025 that Telsey finds smart, given “other companies will need a big acceleration to hit their guidance.”
All in all, she expects the retailer’s robust innovation strategy and strong pipeline to help LULU shares recover as we proceed through the remainder of 2025.
New product lines like Daydrift, Glow Up, and BeCalm, she’s convinced, could see Lululemon stock claw its way back to $445 that indicates potential upside of nearly 50% from current levels.
Note that Dana Telsey is not alone in keeping bullish on the athletic apparel retailer.
The consensus rating on Lululemon Athletica also currently sits at “overweight” with upside to $381 on average.
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