Oppenheimer: Why We Love Lululemon

Shares of Lululemon Athletica inc. LULU were trading slightly higher early Friday morning, despite a bullish note by analysts at Oppenheimer.

Oppenheimer's consumer/specialty retailing analyst Anna Andreeva reiterated an Outperform rating on Lululemon's stock with an unchanged $75 price target, citing that the athletic category is "still hot" and fears around an eventual slowdown are overblown.

The Rating Explained

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Andreeva continued that athletic apparel is still "one of the few bright spots" in retail, as evidenced by strong commentary from retailers, including Kohl's Corporation KSS's statement that athletic was its best performing business in its most recent quarter.

Looking Forward

Andreeva further added that despite new entrants, Lululemon is still expected to maintain and expand its 15 percent-plus market share at the expense of more "mature" companies like Champion and Adidas that are at risk to "donate share."

Meanwhile, Lululemon has shown "momentum" in men's sales (14 percent of total revenue) with double-digit comps for the last three quarters and on track to reach $1 billion in sales over time. Ivivva (29 stores, 10 percent of total footprint) continues to add stores "aggressively" with 20 stores expected for 2015 and a long term objective of 150 stores. Finally, after 10 quarters of negative comps, Canada (24 percent of total revenue) turned positive in the first quarter.

Bottom line, Lululemon has many "natural drivers" that could propel as much as high-single digit comp growth going forward. The analyst is "conservatively" modeling 6 percent comp growth in the bottom half of 2015 and 5 percent for 2016.