[Note: Lululemon’s FY’22 ended on January 29, 2023]
Lululemon (NASDAQ: LULU), a company designing and selling athletic and casual apparel, is scheduled to report its fiscal first-quarter results on Thursday, June 1. We expect LULU stock to likely trade higher due to revenues and earnings beating market expectations. Retail stocks have continued to come under pressure as economic headwinds coupled with inflation have intensified. Despite the current macro headwinds, Lululemon has been able to churn out robust quarterly earnings reports in FY 2022. Management now expects net revenue to be in the range of $9.30 billion to $9.41 billion, representing growth of approximately 15% y-o-y in FY 2023.
Our forecast indicates that Lululemon’s valuation is $390 per share, which is almost 15% higher than the current market price. Look at our interactive dashboard analysis on Lululemon’s Earnings Preview: What To Expect in Fiscal Q1? for more details.
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(1) Revenues expected to be slightly ahead of consensus estimates
Trefis estimates Lululemon’s Q1 2023 revenues to be around $1.95 Bil, slightly ahead of the consensus estimate. Lululemon posted strong results in the fourth quarter as total comparable sales jumped 27%, and overall revenue rose 30% year-over-year (y-o-y) to $2.8 billion. The company’s direct-to-consumer net revenue represented 52% of total net revenue compared to 49% for the fourth quarter of 2021. Also, the retailer opened 32 new company-operated stores during the quarter, ending with 655 stores. Still, its gross margins decreased 300 basis points to 55.1%, as inventories ballooned 50% y-o-y.
The company remains on track to achieve its Power of Three x2 goals it unveiled back in April 2022. The plan aims to roughly double its annual revenue from $6.3 billion in fiscal 2021 to $12.5 billion by fiscal 2026. For the full year, we forecast Lululemon’s Revenues to be $9.4 billion for the full year 2023, up almost 16% y-o-y.
2) EPS likely to marginally beat consensus estimates
Lululemon’s Q1 2023 earnings per share (EPS) is expected to come in at $1.99 per Trefis analysis, marginally beating the consensus estimate. The company’s diluted earnings per share were $0.94 in Q4 2022 compared to $3.36 in the fourth quarter of 2021. However, LULU’s earnings per share increased from an adjusted figure of $3.37 in Q4 2021 to $4.40 in Q4 2022, due to the inclusion of impairment of goodwill charges.
(3) Stock price estimate higher than the current market price
Going by our Lululemon Valuation, with an EPS estimate of around 11.61 and a P/E multiple of 33.6x in fiscal 2023, this translates into a price of $390, which is almost 15% higher than the current market price.
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