Corporate executives and directors tend to have superior information in relation to their firms’ operating activities. If these insiders are buying company stock, it’s generally a bullish signal.
In this report, we are going to highlight some interesting insider buying at Lululemon Athletica Inc (LULU:US). Lululemon is an American retailer that specializes in athletic apparel for women and men. Its products, which are designed for athletic activities such as yoga and running, are sold both in stores and direct to consumers. The company is listed on the NASDAQ Global Select Market and currently has a market capitalization of $42.6 billion.
Lululemon Athletica Inc: Insider Buying
Our insider transaction data shows that on 8 June, board member Martha Morfitt bought 4,800 LULU shares at a price of $330 per share. This purchase cost the insider approximately $1.6 million.
The First Insider Purchase Since 2017
This insider trade stands out for two reasons. Firstly, it is substantial in size. The size of the trade suggests that Ms. Morfitt – who has been a member of the board since 2008 – is confident the stock is set to move higher.
Secondly, insider purchases at Lululemon are quite rare. Our data shows that this is the first insider purchase since June 2017. This suggests that the insider believes there is more value on offer at present than there was in the past.
Strong Q1 Results
Lululemon’s first-quarter results were very strong. For the quarter, net revenue increased 88% year on year to $1.2 billion, with company-operated stores net revenue up 106% and direct-to-consumer net revenue up 55%. Meanwhile, adjusted income from operations was up 479% to $201.5 million. Adjusted diluted earnings per share came in at $1.16 compared to $0.23 in the first quarter of 2020.
Looking ahead, Lululemon expects the strong momentum to continue. For 2021, it expects net revenue to be in the range of $5.83 billion to $5.91 billion (versus $5.63 billion last year) and adjusted diluted earnings per share to be in the range of $6.73 to $6.86 (versus $4.70 in 2020).
"Our momentum remains strong as we enter the second quarter, and we are raising our estimates for the year accordingly. The strength of our financial position allows us to continue to deliver against the Power of Three growth strategies, while we leverage both near- and long-term opportunities," said CFO Meghan Frank.
In light of these strong results, we see the insider buying here as a bullish indicator.