Better Growth Stock: Nike or Lululemon?

Motley Fool2022-09-18

KEY POINTSLululemon has a more classic growth-stock posture.Nike is less risky and might ride through a recession more easily.Sportswear companies Nike and Lululemon Athletica both face big risks over...

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Comments

BennyTay
2022-09-19
BennyTay
👍
Iamboon
2022-09-19
Iamboon
Sure
ZenInv
2022-09-19
ZenInv
The big tick and the omega
Williamw
2022-09-19
Williamw
Ok
YauDK
2022-09-19
YauDK
Ye
- YauDK:
  Ye
Botak Tur
2022-09-19
Botak Tur
Ok
- Botak Tur:
  K

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The stocks have declined in 2022 on fears about slowing spending in the apparel space. Rising costs could pressure earnings, too, and there's a good chance that weaker demand will show up at just the wrong time around the core holiday shopping season.If investors can look past these short-term issues, though, they could benefit from unusually low valuations for these two successful athletic apparel specialists. But which stock is the better buy right now? Let's take a closer look.Better sales: LululemonLululemon has all the characteristics of an attractive growth stock today. Sales gains accelerated to 29% in the most recent quarter and are being lifted by a combination of rising traffic and an expanding store footprint. The company posted a 28% revenue spike in the core U.S. geography last quarter, along with a 35% spike in the international segment .Nike is more established, especially in China, and so its growth trends aren't as head-turning. Revenue for the fourth-quarter period that ended in late May rose just 3%. That figure will likely improve significantly when the company reports fiscal Q1 results in late September because pandemic lockdowns eased in many parts of China.Yet, investors prioritizing sales growth will likely still be drawn to Lululemon, which has a legitimate shot at expanding its geographic presence while pushing into new categories like footwear, outerwear, and menswear.Lower risk: NikeNike, on the other hand, will likely appeal to more risk-averse investors. The blue-chip giant's larger footprint should cushion the business against a recession if one should develop in 2022 and 2023. Nike also has the resources to continue pouring cash into marketing and advertising through any type of selling environment. The company spent $1.1 billion on these channels, which management calls \"demand creation\" expenses. 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Its annual sales footprint has lots of room to expand from the current level of around $7 billion, on the way toward Nike's nearly $50 billion.Sure, there are major risks to that bullish outlook, including a recession in the athleisure industry. But growth-stock investors have to be comfortable with volatility as they wait for market-beating returns to accrue over many 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