LULU stock

Is LULU Stock The Best Retail Stock To Buy Right Now?

Retail stocks have been on one wild ride. Since the coronavirus pandemic, many brick-and-mortar retailers may not recover from the downturn. But why are we focusing on a struggling industry? That’s because no matter how bad things may seem, there’s always a chance to make up for the shortfall in sales. This can be done by providing alternative services to consumers. Many consumers who turned to e-commerce when lockdown measures were in place. And online services provided by many retailers helped them stay afloat during the coronavirus pandemic

retail stocks to watch (LULU stock price)

The fiscal reports from retail companies are all pointing towards one single solution, which is to strengthen their e-commerce platforms. You have companies like Nike (NKE Stock Report) also showing huge growth in the e-commerce segment. Thus, it is hard not to notice the importance of e-commerce in the retail landscape. 

But let’s talk about Lululemon (LULU Stock Report). The company has been beating Wall Street’s expectations for the past few years. But it came below the estimates in their most recent quarter. However, it should be noted that, despite its retail stores being shuttered during the pandemic, Lululemon still managed to turn a profit. This demonstrates the company’s potential, as most of its peers couldn’t manage the same feat during the pandemic. As such, this makes LULU stock one of the best retail stocks to watch right now.

Lululemon To Acquire Interactive Fitness Company Mirror For $500 Million

LULU stock got a further boost following its announcement that it will acquire the hardware company Mirror for half a billion dollars. Mirror is a startup company which sells a $1,495 reflective display. The display allows subscribers to exercise while simultaneously streaming workouts and watching themselves. By making this acquisition, Lulumenon ensures it will have another revenue stream. It also strengthens its range of offerings in the fitness space.

“In 2019, we detailed our vision to be the experiential brand that ignites a community of people living the sweatlife through sweat, grow and connect,” CEO Calvin McDonald said in a press release tied to the news. “The acquisition of MIRROR is an exciting opportunity to build upon that vision, enhance our digital and interactive capabilities, and deepen our roots in the sweatlife. We look forward to learning from and working with Brynn Putnam and the team at Mirror to accelerate the growth of personalized in-home fitness.”

[Read More] Is Now The Time To Buy Fintech Stocks?

E-Commerce Strength Pushed LULU Stock Higher

Many retail companies have opted to go online for the first time during such a challenging time. Some were successful, others not so much. For many, the ability to stay out of bankruptcy is an achievement. Many other companies are just trying to reduce their losses from the insidious virus. However, Lululemon took it to the next level, beating Nike’s in terms of profitability in the most recent quarter. 

While store closures affected both companies, Nike took the bigger hit this past quarter. Revenue fell 38% for Nike, while Lululemon’s sales dipped just 17% in its first fiscal quarter. That said, both companies excelled in the digital sales channel, which saw growth rates of 70% for Lululemon and 79% for Nike. Despite recording higher online sales for Nike, its reliance on department stores and malls further amplified its shortfall.

retail stocks to buy (LULU stock)

One of the main reasons why Lululemon is doing better than some of its industry peers is that fewer of its products are seasonal. This allows the company to avoid the writedown charges that impact companies like Nike and Adidas.

Bottom Line

Despite being able to report profit in its latest quarter, investors might want to note that Lululemon’s sales are concentrated more towards the North American market and the US in particular. That exposure could dampen its results if outbreaks continue to reach new highs here. The company may not benefit even as the virus fades in other parts of the world. All in all, Lululemon is still one great example of a thriving retail stock, with the ability to turn profit during this trying time. That makes LULU stock the best retail stock to watch.

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