Shares of Lululemon Athletica Inc LULU dipped 0.9% to $264.04 Wednesday morning after Nike Inc reported weaker-than-expected first-quarter revenue, raising concerns about the broader athletic apparel market. Nike’s first-quarter revenue came in at $11.59 billion, missing Wall Street's expectations of $11.65 billion.
The 10% year-over-year revenue decline, including drops across North America, China and Europe, has cast a shadow over the entire athletic retail sector, including premium brands like Lululemon.
What To Know: While Lululemon operates in a slightly different segment of the athletic apparel market, specializing in high-end yoga and athleisure wear, Nike's earnings report highlights potential challenges facing the broader industry.
Nike's wholesale revenues, which dropped by 8%, and its 13% decline in Nike Direct revenues, indicate softening consumer demand across athletic wear and footwear. This could suggest potential headwinds for Lululemon, which also relies on maintaining strong consumer interest in performance and lifestyle apparel.
Nike's wholesale revenues, which dropped by 8%, and its 13% decline in Nike Direct revenues, indicate softening consumer demand across athletic wear and footwear. This could suggest potential headwinds for Lululemon, which also relies on maintaining strong consumer interest in performance and lifestyle apparel.
Nike’s earnings miss comes at a time when macroeconomic conditions, including inflation and slowing consumer spending, are pressuring discretionary purchases. Lululemon, known for its premium pricing strategy, could face increased competition for consumer dollars as shoppers become more price-sensitive.
What Else: Although Lululemon has historically benefited from strong brand loyalty and a focus on affluent customers, the broader weakness in Nike’s results could signal cooling demand for athletic apparel in general.
Moreover, Nike's sales decline in key markets, especially North America, where sales dropped 11%, raises concerns for Lululemon’s core business. Both companies rely heavily on North American consumers, and any prolonged slowdown in this region could impact Lululemon’s future growth trajectory.
Lululemon, which has been expanding its product offerings into areas like footwear and men’s wear, could face intensified competition from Nike if the latter leans into promotions and discounts to offset its slowing sales, especially with Nike's inventory still at $8.3 billion, down just 5% year-over-year.
Read Also: Tesla Stock Plunges 3% Despite Q3 Deliveries Exceeding Consensus And Growing Year-Over-Year
How To Buy LULU Stock
Besides going to a brokerage platform to purchase a share – or fractional share – of stock, you can also gain access to shares either by buying an exchange traded fund (ETF) that holds the stock itself, or by allocating yourself to a strategy in your 401(k) that would seek to acquire shares in a mutual fund or other instrument.
For example, in Lululemon Athletica’s case, it is in the Consumer Discretionary sector. An ETF will likely hold shares in many liquid and large companies that help track that sector, allowing an investor to gain exposure to the trends within that segment.
According to data from Benzinga Pro, LULU has a 52-week high of $516.37 and a 52-week low of $226.19.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
