Lululemon Stretches Upward

Lululemon Profits June 2016

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What's going on?

We all know Yoga is en vogue – well apparently Lululemon is too! Its stock shot up to its highest level in more than 2 years after the yoga-wear maker said it expects to make more money than it thought it would this year.

What does this mean?

Lulu has had its problems (remember the see-through yoga pants?!). More recently, it had problems with its supply chain that left it with too much inventory. But sales earlier this year exceeded investors expectations and Lulu continues to shift that excess inventory without denting profits too much. That led the company to increase its expectations for profit this year and sent the stock almost 5% higher on Wednesday.

Why should I care?

The bigger picture: The right brands can still do well even with a generation that supposedly doesnt splash out money on clothing. While we may not be spending as much on clothing as our parents, who didnt have iPhone bills to drain their bank accounts, we do buy clothes! (Were free spirited, but not in the stark naked sense) Also, we tend to be pretty active people. So when we do spend money on clothing, it makes sense that wed buy from a retailer like Lululemon.

For your personally: Premium brands are, largely, keeping their prices up. Yesterday, we reported that Ralph Lauren will more selectively distribute its products in an effort to make more profit per item of clothing sold. And brands like Lululemon, Nike and Under Armour are focusing on innovative fabrics and designs (like these ones highlighted in a Sports Illustrated article on Lulus Olympic gear) that wont come cheap! So dont expect all this weakness in the clothing industry to feed through to much cheaper prices for the premium brands.

Originally posted as part of the Finimize daily email.

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