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lululemon (LULU) Ups Buyback Plan, Boosts Shareholders' Wealth

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lululemon athletica inc.’s LULU business growth opportunities coupled with efficient operating strategies have helped strengthening its base. This, in turn, is helping the company to boost shareholders’ returns through share-repurchasing activities. In a recent SEC filing, this well-known athletic apparel company announced its plans to expand stock buyback plans. Management stated that as on Oct 1, 2021, the company’s board approved a $500-million increase to its existing share repurchase plan.

As a result of this new share repurchase authorization, the company’s stock repurchase program has gone up to $641.2 million from $141.2 million. Management highlighted that the authorization has no limit and does not require the repurchase of a minimum number of shares. During second-quarter fiscal 2021, the company repurchased 0.5 million shares for a total cost of $171.1 million.

Share repurchasing actions are a prudent way of maximizing shareholders’ wealth and generating more value. The company’s latest move to raise share buyback program indicates its commitment toward delivering long-term shareholder value and reflects on its confidence in financial position and ability to generate sufficient cash flows.

Speaking of lululemon’s financial position, the company ended second-quarter fiscal 2021 with total liquidity of $1.6 billion. This included $1,170 million of cash and cash equivalents along with 397.2 million available under its revolving credit facility. In the first half of fiscal 2021, the company generated an operating cash flow of $499.8 million.

A strong balance sheet backed by robust cash flows over the years has enabled lululemon to support growth initiatives and capital allocation. It incurred capital expenditures of $80 million in the fiscal second quarter. For fiscal 2021, the company anticipates capital expenditures of $365-$375 million. The company’s capital spending is mainly directed toward store relocation, openings and renovations as well as supply-chain investment and technological upgrades to support business growth.

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Lululemon is on track with its five-year Power of Three plan, which aims at doubling sales in the men’s and digital categories, and quadrupling sales in the international unit by 2023. This five-year plan focuses on three core objectives — product innovation, augmenting omni-guest experiences and market expansion. The company has been boosting its product assortments through well chalked innovations across categories.

In efforts to boost e-commerce capabilities, lululemon has been investing in developing sites, building transactional omni functionality and increasing fulfillment capacities. The company continues to strengthen omni-channel functions such as curbside pickups, same day deliveries and BOPUS (buy online pick up in store). It is enhancing features like search, browse, checkout, personalization and payment methods across online platforms.

Such well-chalked growth strategies have been aiding the company to uphold its strong brand image in the athletic apparel space as well as meet consumers’ needs aptly.

Shares of this Zacks Rank #3 (Hold) company have increased 5.7% in the past three months against the industry’s decline of 0.9%.

3 Picks You Can’t Miss Out On

Delta Apparel, Inc. DLA, flaunting a Zacks Rank #1 (Strong Buy), delivered an earnings surprise of 102.2% in the last four quarters, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

G-III Apparel Group, Ltd. GIII, also sporting a Zacks Rank #1, delivered an earnings surprise of 180.5% in the last four quarters, on average.

Hanesbrands Inc. HBI, with a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 8.5%.


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