Lululemon and Chewy Show Mixed Results in Challenging Market

In its latest report, the performance of Lululemon and Chewy indicates positive trends amidst a cautious retail environment. While Lululemon raises its outlook with strong sales growth, Chewy shows loyalty despite a slight decline in customers.

Date: 14-12-2024

AI Rating: 6

The report highlights Lululemon Athletica and Chewy as two retail stocks, both demonstrating varying levels of success in the current market scenario. Specifically, Lululemon's performance in Q3 boasts a strong sales boost of 9%, suggesting positive revenue growth as it raises its full-year outlook. Additionally, the company's net income has crossed the $1 billion mark, indicating its capacity for generating profit.

Lululemon's gross profit margin improved to 59% of sales, up from 58% year-over-year, further reflecting its increasing profitability. However, the U.S. division showed a contraction of 2% in this past quarter, which may concern some investors as they seek signs of improvement in this key market.

On the other hand, Chewy faces challenges with a slightly declining active customer pool, which dropped by less than 1% in 2024. Despite recent struggles, Chewy is noted for its loyal customer base, secured largely through its subscription-like autoship service, contributing significantly to its revenue.

In terms of profitability, Chewy has remained sustainable and is generating a growing annual cash flow. Future potential rests on recovering pet adoption rates and continued growth in pet health product categories.

Overall, both companies have strengths that could positively influence their stock prices, particularly Lululemon's robust earnings and Chewy's loyal customer strategy. Investors may find value in Lululemon's updated outlook and Chewy's resilience amid competitive pressures.

Stocks: LULU CHWY