"Shares of Lululemon Athletica ( NASDAQ:LULU) jumped 7% on December 18 following news that activist investor Elliott Management built a $1 billion stake in the athleisure retailer. The move sparked a surge in retail trader enthusiasm on Reddit, with sentiment scores climbing to 72 (bullish) from neutral levels just days earlier. The Elliott news arrives as Lululemon recovers from a brutal year, with shares down 44% over the past 12 months but up 31% in the last month alone."
"The stock's decline reflects broader concerns about tariff exposure and competitive pressure. Lululemon sources heavily from Asia, making it vulnerable to trade policy shifts that compress margins. The company's gross margin fell 290 basis points to 55.6% in Q4 2024, while Americas revenue declined 2% year-over-year. Yet international sales surged 33%, and the company beat revenue estimates by $90 million, signaling resilience beneath the surface noise."
"The Elliott stake ignited discussion on Reddit, where traders highlighted three reasons for optimism: Lululemon trades at just 15x earnings compared to Nike (NYSE:NKE) at 34x, despite superior profit margins of 15.7% versus Nike's 6.2% Elliott's backing of Jane Nielsen, former CFO and COO at Ralph Lauren, as a potential CEO replacement signals strategic focus The stock sits 49% below its 52-week high of $423.32, creating a compelling entry point for contrarians"
Elliott Management built a $1 billion stake in Lululemon, prompting a 7% share price increase and a surge in retail trader sentiment on Reddit to a bullish 72. Lululemon shares fell 44% over the past 12 months but gained 31% in the last month. The decline reflected tariff exposure from heavy Asian sourcing and competitive pressure that compressed margins; gross margin fell 290 basis points to 55.6% in Q4 2024 and Americas revenue declined 2% year-over-year. International sales rose 33%, and revenue beat estimates by $90 million. Retail traders cited valuation discount, superior margins, a potential CEO candidate, and a 49% gap to the 52-week high, while Wall Street remained cautious.
Read at 24/7 Wall St.
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