Shares of Lululemon soared Monday as investors celebrated the stock’s inclusion in the S&P 500 index, sending the fitness wear giant to its highest share price in more than a year.
![Canadian sportswear clothing band, Lululemon logo and store...](https://specials-images.forbesimg.com/imageserve/652d3f50c72bb210921d9f29/960x0.jpg?cropX1=0&cropX2=1306&cropY1=67&cropY2=802)
Lululemon shares surged Monday.
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Key Facts
S&P Dow Jones Indices announced after Friday’s market close that Lululemon would replace video game giant Activision on the S&P after the latter’s sale to Microsoft closed.
Lululemon stock subsequently enjoyed as much as a 10%jump to $417 Monday, registering its highest share price since early 2022 as it heads toward its second-largest daily gain of 2023.
Though nothing changed materially about Lululemon’s strength as a stock, the athleisure firm is getting a boost from a commonly cited phenomenon where a firm’s share price surges upon its inclusion in a major stock index.
This brief surge tends to come as the market anticipates mutual funds and exchange-traded funds tracking the S&P gear up to buy shares in the new entrant, driving the rookie’s share price up.
It was also announced Friday electrical product firm Hubbell will join the S&P, and its shares rose more than 2% Monday.
Key Background
With a market capitalization of $51 billion, Vancouver-based Lululemon is the third-most valuable North American clothing retailer, trailing only rival Nike and TJ Maxx parent TJX. Lululemon stock surged about 200% from March 2020 to November 2021 before crashing amid the broader market correction due to recession fears. Shares remain about 15% below its 2021 peak even after the recent rally.
Contra
A 2021 internal S&P analysis found that there have been almost no excess gains for stocks associated with joining the benchmark index in recent years, though there are several notable exceptions.
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Surprising Fact
Lululemon shares are up 26% this year, far outpacing Nike’s 15% loss. Nike’s $12.9 billion in sales last quarter dwarfed Lululemon’s $2.2 billion, though the Canadian firm’s profitability to scale was far stronger, as Lululemon reported $573 million in earnings before interest, taxes, depreciation and amortization compared to Nike’s $1.8 billion.
This post originally appeared on Forbes.com