What To Expect From Lululemon’s Stock Post Q4?

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Lululemon (NASDAQ: LULU), a company designing and selling athletic and casual apparel, is scheduled to report its fiscal fourth-quarter results on Tuesday, March 29. We expect Lululemon’s stock to trade higher due to revenues and earnings beating expectations in its fourth quarter results. The company’s upcoming Q4 revenues could likely be impacted by Omicron, supply problems, and staff shortages. In fact, the company’s stock price is down 26% in the last six months – as some investors were concerned about the impact the Omicron variant would have on short-term sales trends in the December and early January period. That said, Lululemon is finding strong demand in categories like menswear and outerwear, and it has only started tapping the potential in markets like China, which looks good for its long-term sales. We believe that the retailer seems well-positioned for the post-Covid world, as well, as consumers remain interested in fitness and functional apparel.

Our forecast indicates that Lululemon’s valuation is $367 per share, which is 18% higher than the current market price of $318. Look at our interactive dashboard analysis on Lululemon’s Earnings Preview: What To Expect in Fiscal Q4? for more details.

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(1) Revenues expected to be slightly ahead of consensus estimates

Trefis estimates Lululemon’s Q4 2021 revenues to be around $2.2 Bil, marginally ahead of the consensus estimate. In Q3, the company’s top line grew 30% year-over-year (y-o-y) to $1.5 billion. The company’s y-o-y revenue growth was driven by a 28% increase in North America and a 40% increase internationally. That said, total comparable sales grew 27% y-o-y. When compared to the pre-pandemic quarter, sales were up 26% on a two-year compounded basis compared to 28% last quarter.  We now forecast Lululemon Revenues to be $6.4 billion for the full year 2021, up 45% y-o-y. 

Going forward, Lululemon is also expecting the monthly subscription fee of $39 from its Mirror platform to convert into a recurring revenue stream. While this interactive fitness platform of Mirror is still in its early stages and represents less than 5% of its total revenue, Lululemon’s footprint at 534 locations should be able to provide a wider distribution channel to this product going forward.

2) EPS is also likely to be marginally ahead of consensus estimates

Lululemon’s Q4 2021 earnings per share (EPS) is expected to come in at $3.37 per Trefis analysis, marginally above the consensus estimate of $3.28. It should be noted that the athleisure company has been able to steadily grow its gross margin rate to 57% currently – roughly 10 percentage points higher than its rival Nike. In addition, the company reported an adjusted EPS of $1.44, up 31% y-o-y, in Q3.

(3) Stock price estimate higher than the current market price

Going by our Lululemon’s Valuation, with an EPS estimate of around $7.74 and P/E multiple of 47.4x in fiscal 2021, this translates into a price of $367, which is 18% higher than the current market price.

While LULU stock looks poised for more gains in the future, it is helpful to see how its peers stack up. Check out how Lululemon’s Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.

Returns Mar 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 LULU Return -3% -20% 379%
 S&P 500 Return 2% -7% 99%
 Trefis MS Portfolio Return 2% -9% 259%

[1] Month-to-date and year-to-date as of 3/25/2022
[2] Cumulative total returns since the end of 2016

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