How Did Lululemon Perform In Q2?

At the moment, it seems like there’s no stopping Lululemon Athletica (NASDAQ:LULU). The company managed to post significant improvements in both top and bottom lines, beating out consensus analyst estimates by quite a margin. Revenues in the quarter soared, with sales improving by a whopping 25% year over year. Earnings per share jumped by a remarkable 78% compared to adjusted EPS in the second quarter of fiscal 2017. Further, the company recorded a commendable combined comps of nearly 20%. In general, financials in the quarter were driven by continued implementation of its growth strategies, strong men’s and digital performance, coupled with strong synergies due its website.

Given the stellar performance thus far, the company has decided to up its guidance for a second time this year. They now expect earnings per share to lie between $3.45-$3.53, up from $3.10-$3.18, while revenues come in at around $3.19 billion-$3.24 billion, up from $3.04 billion-$3.075 billion.

The company’s stock price has jumped by nearly 70% since the beginning of the year. While we have revised our price estimate for Lululemon upward, we believe that the market is severely overvaluing the stock at the moment. In this respect, we have created an interactive dashboard analysis Is The Market Pricing Lululemon Fairly to best elaborate on our valuation method and reasoning. We will write a separate article to explain this further.

In the quarter, the company saw great improvements at its digital and international segments. For the quarter, e-commerce contributed nearly $167 million to the overall top line, representing 23% of total revenue. Further, the digital comps rose by a staggering 47%. At international, the athletic manufacturer was able to record a near 50% jump in comps in Asia. In particular, comps in China rose a whopping 200% year over year. We expect both these segments to continue driving the top line at the company in the near term.

As mentioned above, Lululemon is a company that, at the moment, is enjoying the benefits of its well executed growth strategies. From increasing its digital footprint to raising its international presence, the company has worked hard over the past few months to push its top line to new heights.

So far, these strategies seem to be working very well for the apparel giant. Accordingly, management is confident that the company is on track, and could potentially exceed, its target of achieving $4 billion in sales by 2020 as men and digital growth remains on track. In this respect, we expect the remainder of the year to produce similar results.

To learn more about the growth drivers at Lululemon, please read our article What Will Drive Lululemon’s Near Term Growth?