Lululemon Athletica Pops on Q1 Beat, Stock Buyback Boost

lululemon signage seen outside of department store in New York City — (Image credit: Michael M. Santiago/Getty Images)

Lululemon Athletica (LULU) stock is trading higher Thursday after the athletic apparel retailer beat top- and bottom-line expectations for its fiscal first quarter and announced a $1 billion increase to its share repurchase program.

In the quarter ended April 28, Lululemon said its net revenue increased 10.4% year-over-year to $2.2 billion, driven by a 35% rise in international net revenues. Additionally, LULU disclosed n 11.4% jump in earnings to $2.54 per share.

"In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world," Lululemon CEO Calvin McDonald said in a statement. "Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment."

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The results came in ahead of analysts’ expectations. According to Yahoo Finance, Wall Street was anticipating revenue of $2.19 billion and earnings of $2.38 per share.

For the second quarter, Lululemon said it expects net revenue in the range of $2.4 billion to $2.42 billion and EPS to arrive between $2.92 to $2.97. This is slightly below the $2.45 billion in revenue and $3.01 in earnings per share analysts' are projecting.

For the full year, LULU said it continues to expect net revenue in the range of $10.7 billion to $10.8 billion. However, it now expects earnings to arrive between $14.27 to $14.47 per share, up from its previous range of $14 to $14.20.

Lululemon also said its board of directions approved a $1 billion increase to its stock buyback program, bringing the total remaining to $1.7 billion, or 4.2% of its current market cap.

Stock repurchases, also known as buybacks, are another way for corporations to boost value for shareholders. As Kiplinger contributor Mark Hake explains in his piece on "What Is a Stock Buyback," a company "that buys back its shares will produce a higher stock price because as its shares count falls, it forces the price higher."

Hake goes on to explain "that effect produces more value for shareholders, as they pay no taxes on this unrealized gain (until they sell shares)."

Is Lululemon stock a buy, sell or hold?

The consumer discretionary stock is down more than 38% for the year to date, but analysts remain upbeat. According to S&P Global Market Intelligence, the consensus analyst target price for LULU stock is $405.47, representing implied upside of more than 30% to current levels. Meanwhile, the consensus recommendation is a Buy.

CFRA Research analyst Zachary Warring maintained a Strong Buy on LULU stock after the earnings release.

"Although the company is experiencing growth deceleration in the Americas, we continue to believe LULU is the top player in apparel retail and expect an acceleration in growth across the Americas and continued success in China (+45% in Q1) and internationally," Warring wrote in a note to clients.

The analyst has a $435 price target on LULU stock, representing implied upside of nearly 40% to current levels.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.