Bringing back the pants!
Lululemon Athletica inc. (NASDAQ:LULU) is now restocking its yoga pants, without being see-through, and the stock traded higher by 1.5% on last Tuesday behind this news.
Prior to Tuesday’s 17% loss — behind news of Christine Day’s resignation — Lululemon Athletica inc. (NASDAQ:LULU) had been one of the better performing apparel companies of the last five years; gains of 400%. A large portion of those gains have come as a result of the company’s best-selling yoga pants, and their rapid growth.
While two of the company’s biggest products, its Astro and Groove pants, were pulled from the shelf, sales and store traffic has remained strong despite this loss. The two brands were pulled from shelves in March, and has reportedly cost the company $12-$17 million in lost revenue. While a 5% hit to revenue may appear small, product effectiveness is important to a high-growth company such as Lululemon Athletica inc. (NASDAQ:LULU) as is every bit of revenue growth.
Already, analysts are predicting a surge in sales as consumers rush into the stores to buy the newest yoga pant brands. These analysts confirm that both pricing and volume remains strong with the company, and that its “sheer problem” has been forgiven. Seeing as how this new/old revenue stream will be incorporated into the current quarter, and the company had already been on pace to outperform expectations, Lululemon Athletica inc. (NASDAQ:LULU) might be an interesting stock in a fragile retail sector; especially after its losses on Tuesday.
Conclusion
Both of these companies are seeing new revenue streams introduced into their business models. Lululemon Athletica inc. (NASDAQ:LULU)’s revenue is from old, but reinvented products. While Amazon’s upside could be from a much larger grocery segment, and an increase in advertising.
In my opinion, Amazon’s news is much more enticing. Lululemon Athletica inc. (NASDAQ:LULU) is reintroducing an old product, while Amazon is entering a massive market with untouched opportunities. In addition, with groceries being secular, it presents a level of security for investors in a fragile and volatile market. At the surface, this announcement from Amazon looks to create an immediate impact, and I suggest following the grocery integration as the months progress.
The article Two Retailers With Big Announcements That You Should Know originally appeared on Fool.com.
Sherrie Stone has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Lululemon Athletica (NASDAQ:LULU). The Motley Fool owns shares of Amazon.com. Sherrie is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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