Lululemon Has 'Outsized Growth Opportunities' Now And Later, Says Bullish BofA

Lululemon Athletica Inc LULU is among the best growth stories in retail and is expected to be a winner during the COVID-19 pandemic and after it's over, according to BofA Securities.

The Lululemon Athletica Analyst: Lorraine Hutchinson reinstated coverage of Lululemon Athletica with a Buy rating and $390 price target. 

The Lululemon Athletica Takeaways: While building on its existing strength, Lululemon is foraying into new categories, Hutchinson said in a Wednesday note. 

Lululemon reinforced the market for yoga pants over $100 with the "functionality, aesthetic and durability" of its products, the analyst said, adding that the men's ABC pants increase the company's total addressable market. 

Outside North America, Lululemon has “outsized growth opportunities led by China,” where the company plans to “grow its square footage at a 40% CAGR through 2024,” she said.

E-commerce could become a larger mix of sales, with 40% to 50% penetration over the next four years, Hutchinson said. 

“LULU has seen its e-commerce growth surge as a result pandemic-related store closures. However, LULU is in the unique position where its ecom margins are meaningfully higher than in store and the shift will help drive margin expansion.” 

LULU Price Action: Shares of Lululemon Athletica were trading 1.75% higher at $329.33 at last check Wednesday. 

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