The stock rose as much as 10%, its largest intraday gain in more than four months, after an announcement Friday that the company will join the major equity benchmark prior to the opening of trading on Oct. 18. If the jump holds, it will be the retailer’s longest streak of gains since June. Inclusion in the SP 500 adds to an already winning year for Lululemon, which has advanced 29%, besting the broader market, which is up 14% in 2023, and the SP Retail Select Industry Index, down nearly 1% for that period.
“We look upon the addition of shares to the major index as a potential catalyst for incremental interest and buying,” Oppenheimer analyst Brian Nagel wrote in a note to clients.Higher income consumers’ willingness to keep spending on popular apparel brands like Lululemon and Abercrombie Fitch Co. despite economic uncertainty has lifted shares. Lululemon raised its annual sales and profit projections when it reported earnings at the end of August.Overall, Wall Street is positive on the retailer, with 27 analysts giving it a buy rating, six holds and three sells, according to data compiled by Bloomberg. Still, the average price target for Lululemon is about $431, signaling just 4% return potential over the next 12 months. Some analysts also see Lululemon as positioned to gain from a wider adoption of GLP-1 drugs, such as Ozempic and Wegovy, for weight loss. Bank of America Corp. analyst Lorraine Hutchinson said earlier this month that weight loss in the broader population could drive a wardrobe replacement cycle, and she sees young adult and athletic lifestyle brands including Lululemon, Urban Outfitters Inc. and Deckers Outdoor Corp. as the most likely beneficiaries of that potential shopping. Lululemon will replace Activision Blizzard Inc., now owned by Microsoft Corp., in the index, SP Dow Jones Indices said.Separately, Hubbell Inc. will replace Organon Co. in the SP 500, SP Dow Jones Indices said. Hubbell is “more representative of the large-cap market space,” than Organon, which will be moved to the SP SmallCap 600. Hubbell shares rose as much as 4.5% Monday and are up 30% so far this year.
