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Bull of the Day: Lululemon (LULU)

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Sitting at a #1 (Strong Buy) on the Zacks Rank, Lululemon Athletica Inc. (LULU - Free Report) is a retail giant that specializes in athleisure and yogawear for women and men. Its product ranges from pants, shorts, tops, and jackets to accessories like bags, socks, and yoga mats, and are designed for activities like running, spinning, general fitness, and of course, yoga.

Lululemon is based in Vancouver, Canada, and currently operates over 400 stores as well as its popular website and digital app.

Shares Pop on Strong Q1 Earnings

A few weeks ago, Lulu reported impressive Q1 numbers across the board, and shares popped well over 15% as a result.

Both its top and bottom line easily beat the Zacks Consensus. In particular, revenues increased 25% year-over-year.

Total comparable sales surged 20% from the prior-year period, while comparable store sales notched an increase of 8%. Most notably, Lulu’s direct to consumer net revenues skyrocketed 62%.

The company also saw its gross margin expand 370 basis points, and it ended Q1 with $966.6 million in cash and cash equivalents compared to $698.3 million at the end of Q1 fiscal 2017. 

Strong Earnings Outlook

For LULU, its bottom line is trending upward for the foreseeable future.

Earnings are expected to grow over 23% for the current quarter, with 12 analysts revising their outlook upwards recently.

Current fiscal year figures are looking pretty great, with 14 upwards estimates in the last 60 days (though one has cut their outlook during this time frame). The Zacks consensus estimate trend has jumped from $3.08 per share to $3.20 per share.

Next year is looking pretty great as well, with earnings expected to grow about 16%; the consensus has increased 20 cents in the past two months.

LULU has an average earnings surprise of almost 11%.

LULU: What’s Next for the Stock?

Shares of Lululemon have gained almost 57% since the start of the year and nearly 140% in the past one-year period. In comparison, the S&P 500 has gained 4.2% and over 14%, respectively.

LULU is currently trading at a forward P/E of 38.3X.

Its industry, Textile-Apparel, has gained about 25% year-to-date, and the group sits in the top 12% of all industries ranked by the Zacks Industry Rank. LULU, though, is one of the top performers, especially when compared to industry peers like Under Armour (UAA - Free Report) and VF Corp. (VFC - Free Report) .

Taking into account its impressive industry standing, as well as its expected earnings growth, Lululemon could be an exciting opportunity for investors looking to get in to the retail space right now.

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