Bank of America upgraded lululemon (LULU) two notches to Buy from Underperform, its equivalent of a sell rating, as the firm’s analyst believes that initiatives being undertaken by the company enabled its same-store sales growth to accelerate to 5% last quarter.

E-COMMERCE ACCELERATION: lululemon’s e-commerce business is accelerating, partly due to its investments in “visual merchandising, assortment and navigation,” wrote Bank of America Merrill Lynch analyst Rafe Jadrosich. Last month’s online sale also boosted its Internet business, according to Jadrosich. The apparel maker’s e-commerce revenue has increased by around 10% so far this quarter, up from flat last quarter, the analyst estimated. Meanwhile, the company’s men’s apparel business is growing at a clip of around 10%, while it has had a number of successful launches of new products, including its Nulux line and its Online bra, he wrote. Additionally, lululemon’s global brand campaign launched in May and the increased color variety of its assortment have also positive impacted its sales, the analyst stated. Heading into 2018, the company should be boosted further by additional color/prints, the launch of its new “sensation” line, and the initial impact of Chief Merchant Sun Choe on the assortment, the analyst added.

SHARE GAINS: Nike (NKE) and Under Armour (UAA) have “suffered from a lack of innovation, over-distribution in moderate channels and heavy promotions,” enabling lululemon to gain market share, according to Jadrosich. The analyst raised his price target on lululemon shares to $70 from $49.

PRICE ACTION: In morning trading, lululemon rose 1.6% to $59.04 per share.
 

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