(Bloomberg) -- Lululemon Athletica Inc. is likely to report its second straight beat and raise quarterly report, according to retail watchers, when the yoga-wear maker reports quarterly results after the market closes.
Analysts are putting their money where their mouth is, with the average second-quarter adjusted earnings per-share and net sales estimates above the top end of Lululemon’s own forecast range. Investors and traders share in the bullishness, with Lulu shares among the top performers in the S&P Global Luxury Index (SPGLGUP) so far this year.
One reason for the overwhelmingly positive view may be that executives essentially “de-risked” their guidance for tariffs on the first-quarter conference call, saying that only 6% of the company’s total finished goods are exported from China to the U.S.
Lululemon shares are up 52% year to date. The stock gained as much as 3.7% Thursday, ahead of the post-market release.
Here’s what Wall Street has to say ahead of the release.
Stifel, Jim Duffy
- Duffy sees the opportunity for upside to both his estimates and the “more ambitious” consensus estimates, driven by digital strength and gross margin, although the magnitude may not “meaningfully surpass” that seen in the first quarter
- Retail only comparable sales will be in focus and face a tougher year-ago comparison of up 10% (constant currency) vs the first quarter’s 6% compare
- Other areas of focus include margins trends (the drivers of gross margin including product margin improvement and the capacity and commentary around SG&A leverage intention) and Lululemon practice loyalty program test updates and commentary around expectations for a broader roll-out
- Rates buy, price target $238
Quo Vadis Capital, John Zolidis
- Seems Lulu should “easily beat” sales and earnings estimates based on his model, momentum in the business, and his intra-quarter conversation with the company
- Beyond performance in domestic (Canada and the U.S.) channels, Zolidis is interested to see if momentum has carried in Asia, where he believes the company’s positioning as a “premium Western brand is resonating”
- Lulu has a favorable structural margin story with the digital channel (1400 bps margin differential) growing faster than in-store sales
- Long on Lulu
Here’s What Bloomberg Intelligence Says:
“We expect expanded online offerings and buy online, pick up in store capabilities to boost engagement, they way they did in 1Q. Sales growth in China is also key, boosted by the .cn site relaunch.”
“We will be listening for commentary on the launch of self-care offerings online and in 50 stores.”
--Analyst Poonam Goyal
--Click here to view the note
Bank of America Merrill Lynch, Rafe Jadrosich
- Jadrosich expects another beat and raise report as the company remains “an outlier’ in retail
- Lulu’s store traffic in 1Q accelerated sequentially while most retailers decelerated from 4Q; in addition, many retailers said the 2Q started slowly before trends improved sequentially during the quarter, but Lulu’s commentary on its 1Q call suggested it did not see a slowdown to start 2Q
- Upside to full-year comparable sales growth forecast of low-double digits, driven by:
- Direct-to-consumer benefits from investments in merchandising and digital marketing, as well as buy-online/pickup-in-store expansion to all stores in the second half; men’s growth, led by ABC pant; international growth, led by China; and category expansion in outerwear and running
- Rates buy, price target $200
Just the Numbers
- 2Q EPS estimate 89c (range 87c to 92c); Lulu forecast 86c-88c
- 2Q total comparable store sales estimate +12% in constant currency (Consensus Metrix, average of 18 estimates); LULU forecast a low-double digits increase
- 2Q store-only comp. sales estimate +5.2% in constant currency (Consensus Metrix, avg of 14)
- 2Q net revenue estimate $845.3 million (range $833.0 million to $867.0 million); Lulu forecast $825 million to $835 million
- 3Q EPS estimate 90c (range 85c to 94c)
- 3Q net revenue estimate $864.9 million (range $837.0 million to $889.0 million)
- FY adjusted EPS estimate $4.64 (range $4.57 to $4.80); Lulu forecast $4.51-$4.58
- FY net revenue estimate $3.80 billion (range $3.76 billion to $3.87 billion); Lulu forecast $3.73 billion to $3.77 billion
- Lulu forecast a low-double digits increase in full-year comparable store sales (constant dollars)
Data
- 20 buys, 12 holds, 1 sell; average price target $194
- Implied 1-day share move following earnings: 10.7%
- Shares rose after 9 of prior 12 earnings announcements
- Adjusted EPS beat or met estimates in 11 of past 12 quarters
- Shares down 0.5% in past 5 days vs SPX Index up 1.7%
- Shares up 23% in past year vs SPX Index up 3.0%
Timing
- Earnings release expected Sept. 5 after market close
- Call 4:30pm (NY time), (800) 319-4610
- Conference call website
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