Jim Cramer: Buy Lululemon on Women's Footwear Growth at Retailer DSW

NEW YORK (TheStreet) -- DSW  (DSW) is trading higher on Tuesday following its better-than-expected earnings results. Yet according to TheStreet's Jim Cramer, co-manager of the Action Alerts PLUS portfolio, there is a more important message from the company's results. 

That's to buy Lululemon Athletica (LULU) . 

LULU Chart
Lululemon Athletica LULU data by YCharts

On CNBC's "Cramer's Mad Dash" segment, he acknowledged that DSW reported "terrific" results after beating revenue and earnings-per-share expectations. And DSW had its best results in women's footwear since the second quarter of 2013. 

Women's purchasing power is increasing, he reasoned. Some of that purchasing power may make its way into Lululemon's business, fueling the turnaround. Shares are higher by 3.2% on Tuesday.

With a $6 billion market cap, shares of Lululemon Athletica are "very undervalued," Cramer said. He admitted to not "really caring for" for the CEO, but added that he would be surprised if the stock didn't trade higher over the next 12 months. 

"I really think that Lululemon is the takeaway from DSW," Cramer concluded. 

-- Written by Bret Kenwell 

Follow @BretKenwell


TheStreet Ratings team rates DSW INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate DSW INC (DSW) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, largely solid financial position with reasonable debt levels by most measures, notable return on equity and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins."

You can view the full analysis from the report here: DSW Ratings Report

At the time of publication, Cramer's Action Alerts PLUS held LULU.

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