What To Expect From Lululemon’s Stock Past Q1 Earnings

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[Note: Lululemon fiscal year ends January]

Lululemon (NASDAQ: LULU), a company designing and selling athletic and casual apparel, is scheduled to report its fiscal first-quarter results on Thursday, June 2. We expect Lululemon’s stock to trade higher due to revenues and earnings beating expectations in its first-quarter results. In 2021, Lululemon sales grew 42% year-over-year (y-o-y) to $6.3 billion and earnings rose an outstanding 66% y-o-y to $7.49 per share. The athleisure company entered Q1 with strong momentum, but there is a chance that the supply chain issues and rising inflation might have worsened the selling conditions over the last few weeks of the quarter. For the first quarter of 2022, Lululemon expects to generate more than $1.5 billion in sales, a 24% increase. The company’s earnings could range from $1.38 to $1.43 per share for the quarter. In the fiscal year ending in 2022, the company’s management projects revenue of $7.49 billion to $7.62 billion, representing annual growth of 20% to 22%, and also expects EPS to range between $9.15 and $9.35, with the growth of 17% to 20%.

It’s likely that Lululemon would take a step backward if economic conditions worsened, but its strong operating abilities should allow it to generate value for long-term investors. And, the fact that athletic wear has been one of the most consistently growing apparel categories over the last three years, makes Lululemon a little less vulnerable in the recent retail sector meltdown. 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. 

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Our forecast indicates that Lululemon’s valuation is $300 per share, which is 3% higher than the current market price of $293. Look at our interactive dashboard analysis on Lululemon’s Earnings Preview: What To Expect in Fiscal Q1? for more details.

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

Trefis estimates Lululemon’s Q1 2022 revenues to be around $1.57 Bil, marginally ahead of the consensus estimate. In Q4 2021, the company’s sales jumped 23% y-o-y to $2.13 billion, which hit Wall Street’s expectations. The holiday quarter’s growth was driven by a 32% surge in company-operated same-store sales and a 17% increase in direct-to-consumer revenue. We now forecast Lululemon Revenues to be $7.6 billion for the full year 2022, up 22% y-o-y. 

In the upcoming Q1, we can expect Lululemon to give investors some idea about how consumers are responding to the company’s first branded women’s shoes Blissful. We can also expect some news on its five-year financial plan that expects the company to double its 2021 annual revenue by 2026, taking its top line to $12.5 billion.

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

Lululemon’s Q1 2022 earnings per share (EPS) is expected to come in at $1.45 per Trefis analysis, marginally above the consensus estimate. In Q4, the company’s adjusted earnings per share soared 31% y-o-y to $3.37, topping the $3.28 analyst consensus estimate. Direct-to-consumer sales contributed significantly to this outsize difference between sales growth and earnings growth during the fourth quarter.

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

Going by our Lululemon’s Valuation, with an EPS estimate of around $9.40 and a P/E multiple of 31.9x in fiscal 2022, this translates into a price of $300, which is 3% higher than the current market price.

While LULU stock looks poised for modest 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? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 LULU Return -17% -25% 350%
 S&P 500 Return 0% -13% 85%
 Trefis Multi-Strategy Portfolio -1% -18% 223%

[1] Month-to-date and year-to-date as of 5/31/2022
[2] Cumulative total returns since the end of 2016

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