What Happened?

Shares of athletic apparel retailer Lululemon (NASDAQ: LULU) jumped 9.8% in the afternoon session after the company reported better-than-expected third-quarter results and announced the upcoming departure of its CEO, Calvin McDonald. 

The company's revenue for the quarter grew 7.1% year-over-year to $2.57 billion, surpassing analysts' expectations. Earnings per share were also a bright spot, coming in at $2.59, well ahead of the $2.21 consensus estimate. The market also reacted positively to the news that CEO Calvin McDonald will be leaving in January, a move investors may see as an opportunity for a fresh start after a period of slowing growth. 

However, the report was mixed, as Lululemon's revenue guidance for the upcoming fourth quarter of $3.54 billion fell slightly short of Wall Street's projections, and same-store sales growth decelerated to 1%.

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What Is The Market Telling Us

Lululemon’s shares are somewhat volatile and have had 12 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 4 days ago when the stock dropped 4.6% on the news that investors grew concerned over expectations of weak financial results, highlighted by negative analyst commentary. 

Specifically, Jeffries reiterated its 'Underperform' rating and cut its price target to $120, citing risks of shrinking margins and pricing pressures. This outlook reflected broader worries about the company's performance, including several quarters of softer U.S. demand and inconsistent product execution. The commentary painted a picture of declining momentum for the athletic apparel maker ahead of its upcoming earnings report. While the broader consensus rating from analysts remained a 'Hold,' the recent negative sentiment appeared to weigh on the stock.

Lululemon is down 45% since the beginning of the year, and at $204.89 per share, it is trading 51.4% below its 52-week high of $421.16 from January 2025. Investors who bought $1,000 worth of Lululemon’s shares 5 years ago would now be looking at an investment worth $581.40.

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