Cramer reviews Lululemon’s Q2 earnings, says it’s not too late to buy

CNBC’s Jim Cramer on Thursday reviewed Lululemon‘s Q2 earnings, and said he’s pleased with the athletic apparel company’s progress after seeing its stock plummet post-Covid.

“I think it’s not too late to get back into Lululemon if you bailed on it at some point over the past two years,” Cramer said. “The brand seems just as strong as ever and the last couple of quarters, holy cow.”

Lululemon saw major success during the pandemic as many consumers purchased athleisure and loungewear while working from home. Then, when the pandemic’s effects on the consumer economy began to recede, the stock sank. It didn’t help that during the height of the Covid home-workout craze, Lululemon acquired at-home fitness business Mirror for $500 million. Mirror has since become a weight on Lululemon’s balance sheet, and CNBC reported in April that the company is seeking to sell Mirror to a competitor.

Now, Lululemon seems to be rebounding. The company raised its full-year guidance when it reported last Thursday an 18% jump in sales for its second fiscal quarter. Lululemon also said some of its recent success was bolstered by international growth, including a 61% revenue increase in China.

Cramer said he’s optimistic about Lululemon because of its positive guidance and growth over the past few quarters, its success in accessories and its ability to moderate its inventory growth.

Inventory grew 14% in Q2, down from previous guidance of 20%, according to last week’s conference call. Executives on the call also highlighted the performance of the brand’s bag line, which they said contributed to 44% growth in accessories. They specifically highlighted the “Everywhere belt bag,” an over-the-shoulder fanny pack that went viral on various social media platforms.

“I bet Lulu has a terrific holiday season, especially now that their inventories are back at reasonable levels,” Cramer said. “While the stock isn’t cheap, you can justify the price tag. In an environment where so many retailers are struggling, it’s worth paying up for an outfit like Lululemon, which is doing much, much better year over year with management at the top of its game.”

Asia is a huge source of growth for LULU, it's good to see the region finally paying off: Jim Cramer

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