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Lululemon Athletica (LULU) earnings: how much more can the stock appreciate?

Royston Roche | 3:13 am ET, 04 Dec 2018

lululemon athletica inc. (LULU) shares are trading at $140, up 6%. The company is announcing its quarterly earnings results on Wednesday after the market close. What's driving lululemon's stock price?  What's LULU stock price forecast?

Lululemon Athletica designs and distributes retail athletic apparel.  Lately, the stock has performed well: it generated a return of 91% in the past year. The company’s direct-to-consumer strategy is paying off well.

Investors are showing interest in the company because of its strong revenue growth. On the other hand, few bearish investors worry about its high valuation. Last quarter’s revenue rose 25% to $723.50 million and earnings per share came at 71 cents compared to 36 cents for the same period last year. Comparable same-store sales rose 20%.

Third-quarter results will be released after market close on December 05, 2018.  Analysts expect the company to earn 69 cents per share on revenue of $736.10 million. The company beat analysts’ estimates in the previous four quarters.

What is the sentiment towards the LULU stock?  Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending negative;
  • The mid-term sentiment (3-6 months) is trending negative;
  • The long-term sentiment (9-12 months) is trending positive. 

Over the last month, lululemon athletica inc. (LULU) returned -12.06%.

lululemon athletica inc. (LULU) forward P/E ratio is 33.05, and it’s high compared to its industry peers’ P/E ratios.

lululemon athletica inc. (LULU) short share of float is 6.6%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock.

lululemon athletica inc. (LULU) average analyst price target ($128.73) is 6.51% above its current price ($120.86).

For the latest price and information on lululemon athletica inc., please visit Finstead and search for "LULU price" or "LULU news".

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Is lululemon athletica (LULU) overbought?

Carla Olson | 8:26 am ET, 30 Aug 2018

lululemon athletica inc. (LULU) shares are trading at 138.88.  The company is expected to report its earnings on August 30 after the market close.  What's driving LULU stock price? What's LULU stock price forecast?

lululemon has been performing extremely well, generating an astounding 20% same-store sales increase in the first quarter.  The company made a good choice in the new CEO Calvin McDonald. 

Athleisure remains hot in the US, and international growth is on a tear.  With only 70 stores outside the US and Canada, there is a long way ahead for lululemon's geographic expansion in international markets.  Expansion of the men's line should also drive additional square footage growth.

However, the active apparel market is flooding with competition from established players such as Gap. The competitors have large cash reserves and rapid product development capabilities, along with a well-developed international distribution network.

What is the sentiment towards the LULU stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending positive;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive. 

Over the last month, lululemon athletica inc. (LULU) returned +12.83%.

lululemon athletica inc. (LULU) forward P/E ratio is 34.62, and it’s high compared to its industry peers’ P/E ratios.

lululemon athletica inc. (LULU) short share of float is 5.16%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock.

lululemon athletica inc. (LULU) average analyst price target ($95.79) is -30.97% below its current price ($138.76).

For the latest price and information on lululemon athletica inc., please visit Finstead and search for "LULU price" or "LULU news".

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


Lululemon Growth At The Expense Of Store Sales?

Carla Olson | 3:57 pm ET, 08 Dec 2017

retail lululemon LULU

Third-quarter comparable sales growth of 8% and 110 basis point adjusted gross margin expansion (to 52.2%) demonstrated Lululemon’s continued market share gains and pricing power

New store openings and comparable sales growth will moderate long term as the athletic apparel market becomes more saturated and the athleisure trend fades. Analysts expect 9% average annual top-line growth over the next five years and operating margins exceeding 20% by 2021 (versus 2016’s 18%). Assuming such growth levels, current shares may be overvalued.

The main opportunities ahead are in menswear, international, and e-commerce (DTC segment). Male guest transactions grew 21% in the quarter, bolstering our view that menswear can account for about 23% of sales by 2021, up from 18% last year. 

International sales strength was largely thanks to Asia, with market growth of about 100% in the quarter.

DTC sales grew more than 25% for the second straight quarter. 

While this runs ahead of the mid-teens growth we forecast for the year, it overshadows tepid same-store-sales (up 1% constant currency in the third quarter).  Further acceleration may likely come at the expense of store sales rather than producing incremental revenue. 

The channel shift to e-commerce may accelerate, but we don’t view even higher DTC sales altering our view of the company, as we think they would further cannibalize store sales.

Over the last year, LULU has returned +20.77%. This return is higher than Consumer Goods Sector (6.29%), Textile - Apparel Clothing Industry (0.79%), and S&P 500 (17.65%) return.

Analysts believe LULU shares are currently overvalued (visit Finbot and type "LULU price target").

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


lululemon athletica inc. (LULU) Buy or Sell Stock Guide

Updated at: 7:15 pm ET, 24 Nov 2018

The analysis below may be helpful to you if you have any of the following questions about LULU stock:

  • Is LULU a buy or a sell?
  • Should I sell or hold LULU stock today?
  • Is LULU a good buy / a good investment?
  • What are LULU analyst opinions, recommendations, ratings?

Here are LULU stock buy reasons/signals:

1. Lululemon’s unique grassroots marketing, use of ambassadors, mobile app, and community-based interactive stores create a loyal customer base.

2. With only about 400 stores at the end of fiscal 2016 and high brand recognition, there is a long runway for geographic expansion in international markets. Additional square footage growth can be driven through expansion of the men's line.

3. The company should realize some margin benefit from supply-chain investments, and the company competes in the fast-growing, high-margin activewear segment fueled by the athleisure fashion trend.

4. Lululemon emerged strong this holiday season driven by accelerating trends across all parts of its businesses. Further, the company anticipates business strength and current trends to sustain throughout 2018 and beyond. This led it to raise revenue and earnings forecasts for fourth-quarter fiscal 2017.

5. Lululemon is well on track with its strategy for 2020, by which the company aims to double its revenues to about $4 billion and more than double its earnings. To achieve these targets, management had outlined four distinct growth strategies, including product innovation, building store fleet in North America, expanding digital business and international expansion. With more customers turning to online portals, the company expects this channel to account for over one-third of its sales by 2020.

6. Lululemon is strongly focused on enhancing the e-commerce retailing channel and investing in the innovation of new product categories and bringing improvements to its website. Driven by its efforts to deliver an enhanced digital experience, DTC comps surged 26% (an increase of 25% in constant dollars) in third-quarter fiscal 2017.

7. Lululemon is on track with the remodeling of its iviva business into an online brand, as announced in June 2017. Incidentally, Lululemon had announced plans to develop iviva, its activewear brand, into an e-commerce focused business, with only eight iviva stores operating across North America. The company revealed plans to close about 40 of the total 55 iviva stores and convert nearly half of the remaining stores into lululemon branded stores.

8. LULU quarterly revenue growth was 24.50%, higher than the industry and sector average revenue growth (5.92% and 5.31%, respectively).

9. LULU PEG ratio (P/E adjusted for growth) is 1.61, and it’s low compared to its industry peers’ PEG ratios.

10. LULU average analyst rating is Buy.

Here are LULU stock sell reasons/signals:

1. The active-apparel market is flooding with competition, much of which has large cash reserves and a strong supply chain for quick R&D, product development, and geographic expansion.

2. Although Lululemon comps are now positive again, they have not reached historic levels, which we think reflects more competition.

3. Economies of scale and pricing power appear to be more difficult to achieve. We think it is unlikely operating margin can return to the mid-20s range.

4. Considering Price-to-Earnings (P/E) ratio, Lululemon looks pretty overvalued when compared with the broader industry and the S&P 500. The stock has a trailing 12-month P/E of 35.7x, compared with 21.6x for the industry and 20.8x for the S&P 500. The company’s trailing 12-month P/E ratio is higher than the median level of 28.3x, and is pegged lower than the high level of 36.3x, scaled in the past year.

5. Lululemon is an elite and premium activewear brand which had established itself as a market leader in the yoga apparel segment. However, the company is facing stiff competition from leading brands like Gap, Nike, Nordstrom, L Brands and Under Armour, as well as other private and boutique brands to capture market share in the female yoga, running, dancing and stylish casual compression pant product lines. Apart from this, Amazon.com is also extending activewear offerings, thus intensifying the competition.

6. Lululemon does not manufacture raw materials or the final products by itself and therefore, depends on suppliers and third-party manufacturers for all its merchandise. Further, the company does not have any long-term deals with these outside sources and thus, relies on the availability of these products. It also competes with other companies for fabrics, production, raw materials and import quota capacity.

7. The apparel retail industry is consumer-driven and hence, very sensitive to the health of the economy. Spending on apparel and accessories is heavily dependent on the personal disposable income of consumers. Macroeconomic challenges such as high household debt and unemployment levels may restrain consumer spending on these items.

8. LULU profitability is declining. The YoY profit margin change was -3.18pp.

9. LULU forward P/E ratio is 33.05, and it’s high compared to its industry peers’ P/E ratios.

10. LULU Price/Book ratio is 14.06, and it’s high compared to its industry peers’ P/B ratios.

11. LULU Price/Sales ratio is 6.35, and it’s high compared to its industry peers’ P/S ratios.

12. LULU short share of float is 6.60%. The stock is much more frequently shorted than the average industry, sector or S&P 500 stock.

What are your thoughts on LULU?

If you liked this analysis, check out Buy or Sell Stock Guides for other stocks.

Disclaimer: The news article above expresses the author’s opinion about the topic of the article. We strongly advise you not to base your investment decisions just on this article alone. If you’d like to become a writer for Finstead Bites, please send us an email at hi@finstead.com.


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