People continue to go coo coo for lulu. lululemon athletica inc. (LULU - Analyst Report) recently delivered outstanding fourth quarter results, including a remarkable 26% increase in same-store sales.
The company also surpassed $1 billion in sales for the first time in fiscal 2011.
As Momentum Stock Strategist Jared Levy wrote on February 1, lululemon is not only a retailer of Yoga and athletic attire, but their company is firmly entrenched in the culture of the people they sell to. They are to Yogis what Starbucks is to yuppies; a destination that encourages social interaction while selling premium, quality products.
LULU got its start 20 years ago in British Columbia when their founder wanted to create better clothes to get sweaty in. Now their sweat inspired brand reaches customers around the world with close ties to their local communities. Their customer service and culture might be likened to Apple, which is obviously a retail leader with its cult-like following.
The company has 174 stores in North America and Australia.
Fourth Quarter Results
lululemon reported its Q4 results on March 22. Net revenue surged 51% to $371.5 million, ahead of the Zacks Consensus Estimate of $360.0 million. This was driven by a stellar 26% increase in same-store sales.
Direct to consumer revenue, which accounted for 13.5% of total revenue, jumped 104% year-over-year.
The company did see a decline in its gross profit margin however, from 58.5% to 56.3% of net revenue. Not even lululemon can escape rising commodity prices.
The operating margin expanded however to an envious 31.2% of net revenue (almost unheard of in retail) as the company leveraged its fixed expenses. Operating income was up 63% year-over-year.
Earnings per share came in at 51 cents, beating the Zacks Consensus Estimate of 49 cents. It was a 34% increase over the same quarter in 2010. EPS was negatively impacted by a higher tax rate.
As you can see in the company's Price & Consensus chart, consensus estimates have been steadily rising higher over the last several months:
Expect the upward trajectory to continue after the latest earnings beat.
Can its Momentum Continue?
With shares trading around 45x 12-month forward estimates, the stock doesn't look cheap. But when you factor in a consensus long-term EPS growth rate of 30%, its PEG is a more reasonable 1.5.
Of course, valuation wasn't cheap at the end of 2011, but shares have soared a remarkable 63% since then:
The Bottom Line
Expectations are high for LULU, but if the company can continue to deliver positive earnings and sales surprises, expect the stock to continue its upward trajectory.
Read the January 25 article here.
This Week's Growth & Income Zacks Rank Buy Stocks:
Enterprise Products Partners LP (EPD) posted record results for the fourth quarter of 2011 on February 1. It was also its 9th consecutive positive earnings surprise. Estimates have been moving significantly higher for both 2012 and 2013, sending the stock to a Zacks #1 Rank (Strong Buy). Read the full article.
Pharmerica (PMC) is a Zacks #1 Rank (Strong Buy) after posting six consecutive positive earnings surprises and recent accelerating earnings momentum. Read the full article.
Dorman Products (DORM) is a Zacks #1 Rank (Strong Buy) after posting positive earnings surprises and accelerating earnings momentum. Read the full article.
Herbalife Limited (HLF) has surprised analysts to the upside 4 quarters in a row at an average of almost 16.50%. Of the 11 analysts who cover HLF, the consensus is for the company to grow earnings by 10% in the current year (FY2012) and roughly 13% in FY2013. Read the full article.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.