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lululemon athletica inc. (LULU - Free Report) provided a revised forecast for the fourth quarter of fiscal 2022, just ahead of the ICR conference. Management revealed that its business momentum was solid, with strong revenue growth, despite the dynamic macro environment.
The company has been witnessing robust traffic trends, both online and at stores. This is likely to result in strong bottom-line results for the company. It is encouraged by the progress of its Power of Three x2 growth plan.
Driven by the robust trends, the company raised its revenue and earnings per share forecasts for the fourth quarter of fiscal 2022. Earnings per share for fiscal 2022 are likely to be in line with the prior forecast. However, the company sent warnings for the fiscal fourth-quarter gross margin while it expects further SG&A leverage.
lululemon anticipates net revenues of $2.660-$2.700 billion for fiscal 2022, suggesting year-over-year growth of 25-27%. Earlier, the company expected net revenues of $2.605-$2.655 billion, indicating 22-25% year-over-year growth.
For the fiscal fourth quarter, the company expects adjusted earnings per share of $4.22-$4.27 compared with the $4.20-$4.30 mentioned earlier. It estimates an effective tax rate of 28.5% for the fiscal fourth quarter.
The company anticipates the gross margin for the fiscal fourth quarter to contract 90-110 basis points (bps) compared with an increase of 10-20 bps mentioned earlier. However, it expects SG&A expenses to leverage 100-120 bps versus the leverage of 30-50 bps mentioned earlier.
Shares of the Zacks Rank #2 (Buy) company have risen 4.7% in the past three months compared with the industry’s growth of 13.5%.
Image Source: Zacks Investment Research
What’s in Store for lululemon?
lululemon has been capitalizing on the importance of physical retail and the convenience of online engagement. It expects to capture the growing online demand and ensure a robust shopping experience through its accelerated e-commerce investments. It has been investing in developing sites, building transactional omni functionality and increasing fulfillment capabilities.
The company continues to strengthen omni-channel capabilities such as curbside pickups, same-day deliveries and BOPUS (buy online pick up in store). It is enhancing its mobile app in a bid to offer a curbside pickup facility and train its store associates to help customers speed up transactions. Free online digital educator service for people who cannot make it to the company’s stores also bodes well.
The company is 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.
These 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. The company continues expanding its store base.
Lululemon’s Power of Three ×2 growth strategy is likely to double its revenues from $6.25 billion in 2021 to $12.5 billion by 2026. The plan focuses on three key growth drivers — product innovation, guest experience and market expansion. The five-year plan is likely to quadruple international sales, along with doubling digital and menswear sales.
Also, the women’s business and North America operations are each anticipated to witness a low-double-digit CAGR in revenues, with store channel growth in the mid-teens in the next five years. As part of its strategy, the company intends to expand in China, as well as Europe markets, with plans to open stores in Spain and Italy.
For 2021-2026, total net revenues (CAGR) are expected to be 15%, with a slight expansion in the operating margin on an annual basis. lululemon anticipates bottom-line growth to outpace revenue growth. Although the 2026 targets seem too bold, the company believes that these are achievable due to its strong financial position.
Other Stocks to Consider
Some other top-ranked companies from the Consumer Discretionary sector are Oxford Industries (OXM - Free Report) , Ralph Lauren (RL - Free Report) and PVH Corp. (PVH - Free Report) .
The Zacks Consensus Estimate for Oxford Industries’ current financial-year sales and earnings suggests growth of 23.1% and 34.2% from the year-ago period’s reported numbers, respectively.
Ralph Lauren presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 28.7%, on average. RL has an expected long-term earnings growth rate of 4.3%.
The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales suggests growth of 0.1% from the year-ago period’s reported numbers, while the EPS estimate indicates a decline of 7.5%.
PVH Corp currently carries a Zacks Rank #2. PVH has a trailing four-quarter earnings surprise of 22.9%, on average. PVH has a long-term earnings growth rate of 10.2%.
The Zacks Consensus Estimate for PVH Corp’s current financial-year sales and EPS indicates declines of 3.1% and 18.6%, respectively, from the year-ago period’s reported levels.
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lululemon (LULU) Raises Revenue Forecast, Faces Margin Concerns
lululemon athletica inc. (LULU - Free Report) provided a revised forecast for the fourth quarter of fiscal 2022, just ahead of the ICR conference. Management revealed that its business momentum was solid, with strong revenue growth, despite the dynamic macro environment.
The company has been witnessing robust traffic trends, both online and at stores. This is likely to result in strong bottom-line results for the company. It is encouraged by the progress of its Power of Three x2 growth plan.
Driven by the robust trends, the company raised its revenue and earnings per share forecasts for the fourth quarter of fiscal 2022. Earnings per share for fiscal 2022 are likely to be in line with the prior forecast. However, the company sent warnings for the fiscal fourth-quarter gross margin while it expects further SG&A leverage.
lululemon anticipates net revenues of $2.660-$2.700 billion for fiscal 2022, suggesting year-over-year growth of 25-27%. Earlier, the company expected net revenues of $2.605-$2.655 billion, indicating 22-25% year-over-year growth.
For the fiscal fourth quarter, the company expects adjusted earnings per share of $4.22-$4.27 compared with the $4.20-$4.30 mentioned earlier. It estimates an effective tax rate of 28.5% for the fiscal fourth quarter.
The company anticipates the gross margin for the fiscal fourth quarter to contract 90-110 basis points (bps) compared with an increase of 10-20 bps mentioned earlier. However, it expects SG&A expenses to leverage 100-120 bps versus the leverage of 30-50 bps mentioned earlier.
Shares of the Zacks Rank #2 (Buy) company have risen 4.7% in the past three months compared with the industry’s growth of 13.5%.
Image Source: Zacks Investment Research
What’s in Store for lululemon?
lululemon has been capitalizing on the importance of physical retail and the convenience of online engagement. It expects to capture the growing online demand and ensure a robust shopping experience through its accelerated e-commerce investments. It has been investing in developing sites, building transactional omni functionality and increasing fulfillment capabilities.
The company continues to strengthen omni-channel capabilities such as curbside pickups, same-day deliveries and BOPUS (buy online pick up in store). It is enhancing its mobile app in a bid to offer a curbside pickup facility and train its store associates to help customers speed up transactions. Free online digital educator service for people who cannot make it to the company’s stores also bodes well.
The company is 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.
These 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. The company continues expanding its store base.
Lululemon’s Power of Three ×2 growth strategy is likely to double its revenues from $6.25 billion in 2021 to $12.5 billion by 2026. The plan focuses on three key growth drivers — product innovation, guest experience and market expansion. The five-year plan is likely to quadruple international sales, along with doubling digital and menswear sales.
Also, the women’s business and North America operations are each anticipated to witness a low-double-digit CAGR in revenues, with store channel growth in the mid-teens in the next five years. As part of its strategy, the company intends to expand in China, as well as Europe markets, with plans to open stores in Spain and Italy.
For 2021-2026, total net revenues (CAGR) are expected to be 15%, with a slight expansion in the operating margin on an annual basis. lululemon anticipates bottom-line growth to outpace revenue growth. Although the 2026 targets seem too bold, the company believes that these are achievable due to its strong financial position.
Other Stocks to Consider
Some other top-ranked companies from the Consumer Discretionary sector are Oxford Industries (OXM - Free Report) , Ralph Lauren (RL - Free Report) and PVH Corp. (PVH - Free Report) .
Oxford Industries currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.9%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Oxford Industries’ current financial-year sales and earnings suggests growth of 23.1% and 34.2% from the year-ago period’s reported numbers, respectively.
Ralph Lauren presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 28.7%, on average. RL has an expected long-term earnings growth rate of 4.3%.
The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales suggests growth of 0.1% from the year-ago period’s reported numbers, while the EPS estimate indicates a decline of 7.5%.
PVH Corp currently carries a Zacks Rank #2. PVH has a trailing four-quarter earnings surprise of 22.9%, on average. PVH has a long-term earnings growth rate of 10.2%.
The Zacks Consensus Estimate for PVH Corp’s current financial-year sales and EPS indicates declines of 3.1% and 18.6%, respectively, from the year-ago period’s reported levels.