This morning’s impressive rally in the market has given up most of its steam. However, certain stocks are holding up quite well. In particular, Lululemon (NASDAQ:LULU) is one of the names investors are watching closely. Shares of LULU stock are currently up about 2% for the day.
Earlier this morning, LULU stock was up roughly 6% at its peak. This move comes amid optimism around the company’s newly announced resale and trade-in program. For a company with otherwise strong fundamentals and a loyal investor base, the news has been taken very positively.
Many investors have stuck with Lululemon over the years due to the quality of its balance sheet. With little or no debt over the years and favorable leases in key markets, LULU has leveraged scale to become a leading apparel brand among yoga aficionados and the general public.
From a brand loyalty perspective, there’s a lot to like about how the company is positioned relative to peers. Additionally, Lululemon is strong in terms of pricing power. In this rising rate environment, these factors are of utmost importance.
That said, let’s dive into today’s announcement and what it may mean for LULU stock.
LULU Stock Soars on Trade-In Program
Looking to resell those brand new yoga pants or trade in last year’s designs? Maybe, if the price is right.
Right now, today’s announced move allowing consumers to trade in or resell their leggings, tops and jackets in the U.S. is causing a firestorm of discussion. On the one hand, some investors and consumers are wondering how successful the program will be. However, those concerned about inflation seem to like this move as prices become more important.
Today, the overall market appears to be taking the latter view that the program — which is expected to be launched later this month — will be a big hit. Or, at least a worthy experiment.
Currently, shares of LULU stock are priced around 50 times earnings, representing a premium in the world of retailers. However, Lululemon’s incredible fundamentals and growth trajectory make the stock an interesting bet for those bullish on in-store shopping. This announcement gives yet another catalyst for those investors to focus on.
Overall, I tend to agree with the price action of LULU stock today. This company is well-run and has its eye on strategic ways to boost growth. At the very least, it’s worth keeping shares on the watch list, should the market provide a better entry point over the medium term.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.