Lululemon (NASDAQ:LULU) is getting a workout in on Wednesday as LULU stock climbs higher. Investors are rewarding the company for resuming its share buyback program.
According to a filing with the U.S. Securities and Exchange Commission on Tuesday, Lululemon is ready to start buying back its stock. Its current program still has approval for another $263.6 million worth of shares. Why does this really matter?
Unsurprisingly, the company halted the program due to the novel coronavirus. But Lululemon was by no means alone in making that decision. Companies around the world faced delicate financial situations, and with a long-lasting pandemic, have been forced to slash dividends, halt buyback programs and lay off thousands of employees.
For investors, news that Lululemon is resuming the buyback program is likely a sign of recovery.
It is also important to note that there are a few other catalysts coinciding with the buyback announcement. The first is that LULU stock has had a rough month. Although Lululemon has broadly been a coronavirus winner, driven on by its comfy and popular athleisure, LULU shares have dropped more than 20% in the last few weeks. Wall Street reacted poorly to the second-quarter report, even though the company beat estimates. It also announced online sales were up 155%.
The other important buyback catalyst to note is that Lululemon is now part of the first wave of companies to resume programs. Intel (NASDAQ:INTC) recently turned heads after resuming its program, and analysts think these first companies are showing Wall Street that they really have the money. Confidence, shareholder perks and a strong business are a great recipe for Lululemon here.
Why LULU Stock Looks Hot on Wednesday
There is no denying that investors are excited over the share buyback announcement, but there are other reasons to be bullish on Lululemon. The retailer has continued to thrive during the pandemic, even acknowledging its struggles in the last month. Shares are up almost 40% in 2020.
Coronavirus stay-at-home orders and social distancing have made Lululemon and its at-home fitness peers great companies this year. Lululemon is a top destination for apparel, but it is also working to become a top supplier of equipment.
We reported earlier in the summer on how its acquisition of Mirror made LULU stock a great buy. Mirror is the maker of a connected screen for fitness — essentially a high-tech home gym. The announcement initially saw investors bid up shares, treating it as a rival to Peloton (NASDAQ:PTON).
As the market waits for this big move to play out, investors can find reason for faith in that Lululemon is resuming its buyback program.
On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Sarah Smith is a Web Content Producer for InvestorPlace.com.
