Lululemon Earnings Preview: Could End The Year With A Bang

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Lululemon Athletica (NASDAQ:LULU) is all set to report its Q4 earnings this Wednesday. Last quarter, the company comfortably beat the earnings estimate, leading to a 10% uptick in the stock price. Since the beginning of 2017, however, the stock has taken a hit on the back of stronger headwinds, while stocks of competitors like Nike have grown by about 13%. That said, the activewear manufacturer enjoyed a strong holiday season and has managed to consistently improve revenues and gross margins over the financial year. We can expect the same momentum to carry forward.

Additionally, management has reiterated that Lululemon is on track to achieve its five year goal, as stated in 2015, of doubling its revenues (to over $4 billion) and more than doubling its profits by 2020.

Recently, the company narrowed its previous guidance to the top range, now expecting between $775 million and $785 million in comparison to the previously set $765 million to $785 million. Earnings per share is expected to lie within the $0.99 to $1.01 range.

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Possible Highlights:

  • In the recent past, Lululemon has tried very hard to expand its store base in North America. So far the strategy has proved to work. Not only does this mean additional sales, but it also enables greater growth in the brand’s image and targeted marketing. Going forward, the company plans to increase its presence in North America further as it prepares a plan to combat local competition efficiently.

  • Better store comps and increased square footage could help the company drive the top-line even further. We can expect store comps to increase in the higher single digit range.
  • On the last call, management clearly stated its intentions to grow the revenues from menswear in the coming quarters. They hope that the menswear category will account for at least a quarter of the total revenues by 2020.
  • The company is also extremely eager to build its international presence going forward. In this respect, Lululemon is set to launch its first three stores in China. The opening of these stores is just a stepping stone in its broader plan. The company proposes to open an additional three to four stores in the coming quarters while expanding their online presence in the country.
  • In Europe, the apparel giant launched its international flagship store on Regent Street in London. Apart from additional sales, this store will also be a great way to advertise the brand further, given the street’s global fame and traffic.

  • The company’s focus has been to bring to life its digital vision, pulling through a combination of engaging storytelling, personalization and assortment, while making the commerce experience scalable, easy, and frictionless. Lululemon is concentrating on making the online experience as engaging and seamless as possible, and its efforts seem to be moving in the right direction. In the last quarter, revenues from its digital store increased to 19.1%, up 500 basis points year-over-year. We can expect this figure to rise further this quarter.

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