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Lululemon Shares Surge on Talk of Under Armour Takeover

Speculation surrounding yoga wear retailer Lululemon being up for purchase has pegged Nike and Under Armour as potential buyers in the past, and the resurging rumors have sent the brand’s stock up as much as 15 percent in recent days.

There is “plenty of chatter” about Under Armour being in talks about buying the once sheer pants brand, the NY Post wrote in an article Sunday, which sent stocks up more than 7 percent to $52.77, and then news from Bloomberg Gadfly saying that Nike should buy the retailer gave shares an additional boost.

Under Armour has been building up its business this year, incorporating new campaigns to position itself as a leader in training and lifestyle, and acquiring nutrition-tracking platform MyFitnessPal and fitness-tracking platform Edmondo to “further enable the brand to provide unparalleled health and fitness data and insight.”

The performance retailer has also been working to expand its women’s offering, which a Lululemon acquisition could make sense for.

Lululemon hasn’t been short on setbacks in recent years, from its sheer pants debacle to its founder’s highly unfavorable comments about women’s bodies not “working” for the brand’s pants, but analysts at Morgan Stanley said in a note this month that the company’s comparable store sales could see an increase.

The retailer’s introduction of a revamped pants wall that lets customers choose their gear based on how they want to feel in it, like “Held-In” or “Naked,” and the relaunch of its tank wall could add newness to the brand. Analysts expect comp store sales to jump between 5 and 12 percent this holiday shopping season.

In it’s second quarter earnings report, Lululemon posted net revenue up 16 percent to $453 million year over year and a 6 percent comp store sales increase. The retailer will release its third quarter earnings on Dec. 9.

None of the named companies have made any comments on the conjectures.

At publication time, Lululemon’s stock was trading at $52.12, down slightly from Monday’s close, but up 18 percent from one week ago. Even with the recent uptick, the company’s stock is still close to 30 percent lower than its 52-week high.

Analysts, however, are skeptical that either Under Armour or Nike would pay for Lululemon at a price still more than 20 times over earnings estimates.