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Why Should You Add lululemon (LULU) Stock to Your Portfolio?
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lululemon athletica inc. (LULU - Free Report) has been favored by investors for quite some time, owing to solid business fundamentals combined with strong brand positioning in the athletic apparel space. The company is also benefiting from continued growth in e-commerce operations. This has been a boon for its overall performance.
The company retained investors' bullish sentiments by maintaining its earnings beat streak in all of the last four quarters, the average being 24.1%. The top line also surpassed estimates in the last four quarters. This underlines lululemon’s operational excellence.
In the past seven days, the company’s estimates for fiscal 2021 and fiscal 2022 earnings per share have moved up by 2 cents each. For fiscal 2021, its earnings estimates are pegged at $7.08 per share, suggesting a rise of 50.6% from the year-ago reported figure.
The Zacks Rank #2 (Buy) stock has gained 29.9% in the past three months compared with the industry’s growth of 8.4%. The stock also comfortably outpaced the S&P 500’s growth of 7.8% and compared favorably against the Consumer Staples sector’s decline of 1.4% in the same period.
Image Source: Zacks Investment Research
Now let us discuss at length what makes the leading apparel retailer an investor favorite.
lululemon’s quarterly performances have been benefiting from growth across all categories, channels and geographies, led by continued e-commerce expansion and rebound in in-store sales. The company witnessed a rebound in brick-and-mortar stores in first-quarter fiscal 2021, driven by improved footfall as consumers moved out to stores for their shopping needs. Continued momentum in the e-commerce channel was also a key driver. The company also reported robust growth compared with the first quarter of fiscal 2019.
lululemon has been witnessing strong momentum in its e-commerce channel. In first-quarter fiscal 2021, the company witnessed a 50% rise in digital channel comps, booting its overall direct-to-consumer revenues. Direct-to-consumer sales rose 55%, representing 44.4% of the company’s total revenues. Digital revenues were aided by notable strength in traffic and conversions. The company has been witnessing robust traffic trends, driven by both new and existing guests, while conversion continues to gain from positive customer responses for its enhancements on the e-commerce sites and the mobile app.
Looking ahead, the company expects to capture the growing online demand and ensure a robust shopping experience through its accelerated e-commerce investments this year. It has been investing in site development, building transactional omni functionality and increasing fulfillment capabilities. It plans to boost online category offerings and creative content.
For fiscal 2021, e-commerce growth is likely to be partly offset by a modest decline in the fiscal second quarter. The company anticipates e-commerce sales in the fiscal second quarter to decline modestly from the prior-year quarter, as it laps the height of COVID-related channel shifts and online warehouse sales. On a two-year CAGR basis, e-commerce sales are anticipated to increase 55% in the fiscal second quarter. It expects e-commerce sales to increase modestly in the fiscal third and fourth quarters. Consequently, it expects e-commerce sales growth in high-single digits for fiscal 2021 relative to the outsized strength seen in 2020.
Lululemon has witnessed a rebound in brick-and-mortar sales, driven by an increase in store traffic as consumers returned to stores for shopping. In the fiscal first quarter, revenues at the company-operated stores advanced 106% year over year. Management pointed out that in-store productivity improved 88% from the fiscal 2019 levels. As the economies open after the easing of COVID-led restrictions, lululemon had 93% of its global stores open as of the end of the fiscal first quarter.
The company continues to remain focused on investments to enhance the in-store experience. It is leveraging its stores to facilitate omni-channel capabilities, including the buy online pickup in store and ship from store. It has implemented several strategies to improve the guest experience and reduce wait time. These include virtual waitlist, mobile POS and appointment shopping. The functionalities enable reducing the time of waiting in line to enter the store as well as allow customers to complete some transactions like returns, exchanges and purchase of gift cards without entering the store. For second-quarter fiscal 2021, the company expects flat in-store sales on a two-year CAGR basis.
lululemon is on track with its five-year Power of Three plan, which aims at doubling sales in men’s and digital categories, and quadrupling sales in the international unit by 2023. The five-year plan focuses on three core objectives — product innovation, augmenting omni-guest experiences and market expansion. The company remains optimistic about the innovations it plans to bring in its assortments for both men and women.
Management plans to keep investing in strategies to maintain customer footfall, including efforts to augment the store base and enhancing shopping experiences. Driven by the plans, the company earlier anticipated delivering sales growth in the low-teens in the next five years. lululemon also expects some annual benefits from this plan, which include modest gross margin improvement, a slight reduction in SG&A costs, operating growth in excess of sales growth, earnings per share growth equal to or more than operating income growth, and capital expenditure of 6-8% of sales.
Conclusion
Backed by the strong business momentum, driven by strong in-store and online sales momentum and the progress on its Power of Three plan, we expect the company to retain its business momentum in the near term.
Image: Bigstock
Why Should You Add lululemon (LULU) Stock to Your Portfolio?
lululemon athletica inc. (LULU - Free Report) has been favored by investors for quite some time, owing to solid business fundamentals combined with strong brand positioning in the athletic apparel space. The company is also benefiting from continued growth in e-commerce operations. This has been a boon for its overall performance.
The company retained investors' bullish sentiments by maintaining its earnings beat streak in all of the last four quarters, the average being 24.1%. The top line also surpassed estimates in the last four quarters. This underlines lululemon’s operational excellence.
In the past seven days, the company’s estimates for fiscal 2021 and fiscal 2022 earnings per share have moved up by 2 cents each. For fiscal 2021, its earnings estimates are pegged at $7.08 per share, suggesting a rise of 50.6% from the year-ago reported figure.
The Zacks Rank #2 (Buy) stock has gained 29.9% in the past three months compared with the industry’s growth of 8.4%. The stock also comfortably outpaced the S&P 500’s growth of 7.8% and compared favorably against the Consumer Staples sector’s decline of 1.4% in the same period.
Image Source: Zacks Investment Research
Now let us discuss at length what makes the leading apparel retailer an investor favorite.
lululemon’s quarterly performances have been benefiting from growth across all categories, channels and geographies, led by continued e-commerce expansion and rebound in in-store sales. The company witnessed a rebound in brick-and-mortar stores in first-quarter fiscal 2021, driven by improved footfall as consumers moved out to stores for their shopping needs. Continued momentum in the e-commerce channel was also a key driver. The company also reported robust growth compared with the first quarter of fiscal 2019.
lululemon has been witnessing strong momentum in its e-commerce channel. In first-quarter fiscal 2021, the company witnessed a 50% rise in digital channel comps, booting its overall direct-to-consumer revenues. Direct-to-consumer sales rose 55%, representing 44.4% of the company’s total revenues. Digital revenues were aided by notable strength in traffic and conversions. The company has been witnessing robust traffic trends, driven by both new and existing guests, while conversion continues to gain from positive customer responses for its enhancements on the e-commerce sites and the mobile app.
Looking ahead, the company expects to capture the growing online demand and ensure a robust shopping experience through its accelerated e-commerce investments this year. It has been investing in site development, building transactional omni functionality and increasing fulfillment capabilities. It plans to boost online category offerings and creative content.
For fiscal 2021, e-commerce growth is likely to be partly offset by a modest decline in the fiscal second quarter. The company anticipates e-commerce sales in the fiscal second quarter to decline modestly from the prior-year quarter, as it laps the height of COVID-related channel shifts and online warehouse sales. On a two-year CAGR basis, e-commerce sales are anticipated to increase 55% in the fiscal second quarter. It expects e-commerce sales to increase modestly in the fiscal third and fourth quarters. Consequently, it expects e-commerce sales growth in high-single digits for fiscal 2021 relative to the outsized strength seen in 2020.
Lululemon has witnessed a rebound in brick-and-mortar sales, driven by an increase in store traffic as consumers returned to stores for shopping. In the fiscal first quarter, revenues at the company-operated stores advanced 106% year over year. Management pointed out that in-store productivity improved 88% from the fiscal 2019 levels. As the economies open after the easing of COVID-led restrictions, lululemon had 93% of its global stores open as of the end of the fiscal first quarter.
The company continues to remain focused on investments to enhance the in-store experience. It is leveraging its stores to facilitate omni-channel capabilities, including the buy online pickup in store and ship from store. It has implemented several strategies to improve the guest experience and reduce wait time. These include virtual waitlist, mobile POS and appointment shopping. The functionalities enable reducing the time of waiting in line to enter the store as well as allow customers to complete some transactions like returns, exchanges and purchase of gift cards without entering the store. For second-quarter fiscal 2021, the company expects flat in-store sales on a two-year CAGR basis.
lululemon is on track with its five-year Power of Three plan, which aims at doubling sales in men’s and digital categories, and quadrupling sales in the international unit by 2023. The five-year plan focuses on three core objectives — product innovation, augmenting omni-guest experiences and market expansion. The company remains optimistic about the innovations it plans to bring in its assortments for both men and women.
Management plans to keep investing in strategies to maintain customer footfall, including efforts to augment the store base and enhancing shopping experiences. Driven by the plans, the company earlier anticipated delivering sales growth in the low-teens in the next five years. lululemon also expects some annual benefits from this plan, which include modest gross margin improvement, a slight reduction in SG&A costs, operating growth in excess of sales growth, earnings per share growth equal to or more than operating income growth, and capital expenditure of 6-8% of sales.
Conclusion
Backed by the strong business momentum, driven by strong in-store and online sales momentum and the progress on its Power of Three plan, we expect the company to retain its business momentum in the near term.
Other Stocks to Watch
Crocs, Inc. (CROX - Free Report) has a long-term earnings growth rate of 15%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ralph Lauren Corporation (RL - Free Report) has an expected long-term earnings growth rate of 15%. It currently sports a Zacks Rank #1.
Hanesbrands Inc. (HBI - Free Report) , also a Zacks Rank #1 stock, has a long-term earnings growth rate of 8.5%.