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Online Sales to Likely Aid lululemon's (LULU) Earnings in Q2

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lululemon athletica inc. (LULU - Free Report) is slated to report second-quarter fiscal 2020 results on Sep 8, after market close. The yoga-inspired athletic apparel company delivered a negative earnings surprise of 15.4% in the last reported quarter. Moreover, its bottom line lagged estimates by 0.7%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for the company’s fiscal second-quarter earnings is pegged at 51 cents, suggesting a decline of 46.9% from the year-ago quarter’s reported figure. Earnings estimates have moved up by a penny in the past seven days. The consensus estimate for fiscal second-quarter sales is pegged at $833.8 million, indicating a 5.6% decline from the prior-year quarter’s reported figure.

Key Factors to Note

lululemon has been witnessing momentum in its e-commerce business since the onset of the coronavirus pandemic. It has been investing in websites and mobile app for the last several quarters to enhance the guest experience, which has been aiding performance amid the pandemic. These investments have improved functionality, including checkout, navigation, search browse and the speed of its sites. Notably, online sales soared 125% in April, with the momentum continuing in the initial days of the fiscal second quarter.

lululemon athletica inc. Price and EPS Surprise


lululemon athletica inc. Price and EPS Surprise

lululemon athletica inc. price-eps-surprise | lululemon athletica inc. Quote

Moreover, the company has been reopening stores across all regions, with most of its stores now open. The stores are expected to have contributed to sales in the fiscal second quarter. While it is working on the reopening of its store, it expects continued momentum in the e-commerce business in the fiscal second quarter.

On the last reported quarter’s earnings call, the company expected revenues for the digital channel to remain strong in the fiscal second quarter. Management anticipated digital sales in the fiscal second quarter to be consistent with 125% growth witnessed in April. Moreover, it predicted sequential revenue improvement throughout the rest of fiscal 2020. For the fiscal second quarter, it anticipated a revenue decline of high-single digits.

To back growth in e-commerce, lululemon moved to quickly harness the power of its flexible distribution network to ensure a high level of service to guests. It recently implemented intelligent sourcing capabilities that use machine learning and artificial intelligence to route e-commerce orders through the distribution network in the most efficient way. This is expected to have increased delivery speed, minimizing costs and efficiently utilizing inventory pools to help reduce markdowns. This is likely to have bolstered the top-line number in the fiscal second quarter.

Zacks Model

Our proven model predicts an earnings beat for lululemon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

lululemon has a Zacks Rank #2 and an Earnings ESP of +11.77%.

Other Stocks Likely to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat.

Caseys General Stores, Inc. (CASY - Free Report) currently has an Earnings ESP of +4.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH (RH - Free Report) presently has an Earnings ESP of +13.47% and a Zacks Rank #2.

NIKE, Inc. (NKE - Free Report) currently has an Earnings ESP of +6.24% and a Zacks Rank #3.

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