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Lululemon's (LULU) Prospects Look Bright: Should You Hold?
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Lululemon Athletica Inc. (LULU - Free Report) looks impressive, backed by its immense growth potential, long-term strategy and robust third-quarter fiscal 2016 results. Notably, the stock has surged 30.8% on a year-to-date basis compared with the Zacks categorized Textile-Apparel Manufacturing industry that declined 4.7%. Moreover, this Zacks Rank #3 (Hold) company has a long-term earnings growth rate of 15.7%, making us more confident about the stock.
Lululemon aims to double its revenues to about $4 billion and more than double its earnings by 2020. In line with these plans, management has outlined four distinct growth strategies, including product innovation, building store fleet in North America, strengthening digital business and international expansion.
This yoga-inspired athletic retailer remains keen on expanding store base overseas and anticipates its international business, including e-commerce, to account for nearly 20–25% of the total sales by 2020. We believe that there remains room to expand across the U.S. and in the underpenetrated European and Asian markets as well. Thus, it is well positioned for continuous growth and improved profitability, going forward.
Backed by the above mentioned factors, Lululemon reported robust results for the fiscal third quarter, wherein both sales and earnings surged year over year and outpaced estimates. We observed that the company’s top line has outperformed the Zacks Consensus Estimate in six out of seven trailing quarters. (Read more: Lululemon Tops Q3 Earnings, Ups View; Stock Gains)
The upbeat performance prompted management to raise its earnings outlook. Lululemon now projects fiscal 2016 earnings in the band of $2.18–$2.23 per share or $2.11–$2.16 normalized for the tax and related interest adjustments. Earlier, the company had projected earnings for the fiscal of $2.11–$2.19 per share, or normalized earnings of $2.07–$2.15.
Moreover, the Zacks Consensus Estimate of $2.15 and $2.56 for fiscal 2016 and fiscal 2017 increased 3 cents and 5 cents, respectively, over the past 30 days. Further, it anticipates earnings for the fiscal fourth quarter to be in the range of 96 cents–$1.01 per share, while the Zacks Consensus Estimate for the quarter is currently pegged at $1.00.
Though the company raised its fiscal 2016 earnings view, its lowered sales outlook hurt investors’ sentiments. For fiscal 2016, Lululemon now projects sales to range from $2.320–$2.340 billion, based on anticipations of mid single-digits comparable-store sales (comps) growth on a constant dollar basis. Earlier, the company had projected full fiscal sales in the range of $2.325–$2.350 billion, while comps projections were the same.
Further, Lululemon faces intense competition from leading brands like NIKE, Inc. (NKE - Free Report) . Also, currency woes and macroeconomic challenges remain concerns for the company.
Stocks that Warrant a Look
Some better-ranked stocks in the same industry include Tailored Brands, Inc. and Perry Ellis International, Inc. .
Perry Ellis, which carries a Zacks Rank #2 (Buy), has gained roughly 44.4% year to date.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
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Lululemon's (LULU) Prospects Look Bright: Should You Hold?
Lululemon Athletica Inc. (LULU - Free Report) looks impressive, backed by its immense growth potential, long-term strategy and robust third-quarter fiscal 2016 results. Notably, the stock has surged 30.8% on a year-to-date basis compared with the Zacks categorized Textile-Apparel Manufacturing industry that declined 4.7%. Moreover, this Zacks Rank #3 (Hold) company has a long-term earnings growth rate of 15.7%, making us more confident about the stock.
Lululemon aims to double its revenues to about $4 billion and more than double its earnings by 2020. In line with these plans, management has outlined four distinct growth strategies, including product innovation, building store fleet in North America, strengthening digital business and international expansion.
This yoga-inspired athletic retailer remains keen on expanding store base overseas and anticipates its international business, including e-commerce, to account for nearly 20–25% of the total sales by 2020. We believe that there remains room to expand across the U.S. and in the underpenetrated European and Asian markets as well. Thus, it is well positioned for continuous growth and improved profitability, going forward.
Backed by the above mentioned factors, Lululemon reported robust results for the fiscal third quarter, wherein both sales and earnings surged year over year and outpaced estimates. We observed that the company’s top line has outperformed the Zacks Consensus Estimate in six out of seven trailing quarters. (Read more: Lululemon Tops Q3 Earnings, Ups View; Stock Gains)
The upbeat performance prompted management to raise its earnings outlook. Lululemon now projects fiscal 2016 earnings in the band of $2.18–$2.23 per share or $2.11–$2.16 normalized for the tax and related interest adjustments. Earlier, the company had projected earnings for the fiscal of $2.11–$2.19 per share, or normalized earnings of $2.07–$2.15.
Moreover, the Zacks Consensus Estimate of $2.15 and $2.56 for fiscal 2016 and fiscal 2017 increased 3 cents and 5 cents, respectively, over the past 30 days. Further, it anticipates earnings for the fiscal fourth quarter to be in the range of 96 cents–$1.01 per share, while the Zacks Consensus Estimate for the quarter is currently pegged at $1.00.
LULULEMON ATHLT Price and Consensus
LULULEMON ATHLT Price and Consensus | LULULEMON ATHLT Quote
Though the company raised its fiscal 2016 earnings view, its lowered sales outlook hurt investors’ sentiments. For fiscal 2016, Lululemon now projects sales to range from $2.320–$2.340 billion, based on anticipations of mid single-digits comparable-store sales (comps) growth on a constant dollar basis. Earlier, the company had projected full fiscal sales in the range of $2.325–$2.350 billion, while comps projections were the same.
Further, Lululemon faces intense competition from leading brands like NIKE, Inc. (NKE - Free Report) . Also, currency woes and macroeconomic challenges remain concerns for the company.
Stocks that Warrant a Look
Some better-ranked stocks in the same industry include Tailored Brands, Inc. and Perry Ellis International, Inc. .
Tailored Brands has surged 129.5% in the past six months and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Perry Ellis, which carries a Zacks Rank #2 (Buy), has gained roughly 44.4% year to date.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>