Back to top

lululemon (LULU) Up 14% YTD: Will the Bull Run Continue?

Read MoreHide Full Article

lululemon athletica inc. (LULU - Free Report) continues to gain investors’ confidence backed by its 2020 Strategy, focus on e-commerce channel, global footprint expansion as well as solid top- and bottom-line surprise history. The company delivered fourth-consecutive positive earnings surprise and ninth straight sales beat in fourth-quarter fiscal 2017.

This has also boosted the company’s share price performance, with the stock rallying 14.1% year to date, cruising ahead of the Textile-Apparel industry’s gain of 6.8% and the broader Consumer Discretionary sector’s decline of 2.3%. Currently, the industry ranks in the top 35% (90 of 256) of all Zacks industries.

Additionally, the momentum seems to be intact after lululemon reported excellent fourth-quarter fiscal 2017 mainly driven by synergies from the re-launch of its website, improvements in product margins and cost efficiencies within its supply chain, product innovation, and introducing new store formats. (Read: lululemon Rallies on Q4 Earnings Beat, Robust View)

Post earnings, this Vancouver-based company gained 13.8% and is currently hovering close to its 52-week high of $91.44.

Going into 2018, lululemon is likely to witness strong momentum across its business while executing successfully on its growth strategies. In addition, analysts have become optimistic on the stock as it witnessed a solid uptrend in its earnings estimates. The Zacks Consensus Estimate of 45 cents and $3.08 for first-quarter and fiscal 2018 moved north by 5 cents and 6 cents, respectively, in the last 30 days. Management envisions earnings per share in a band of 44-46 cents for the first quarter and $3-$3.08 for the fiscal year.

A Glimpse of lululemon’s Robust Strategies

lululemon is well on track with its strategy for 2020, which targets doubling revenues to about $4 billion and more than doubling its earnings. To this end, management seems to be focused on product innovation, building store fleet in North America, expanding digital business and international expansion. With more customers turning to online portals, it expects this channel to account for over one-third of its sales by 2020. Also, the company remains keen on expanding store base overseas and expects its international business, including e-commerce, to account for nearly 20-25% of the total sales by the same time frame.

Meanwhile, lululemon’s continued efforts toward enhancing the e-commerce retailing channel, investing in the innovation of new product categories and bringing improvements to its website are impressive. In fact, fiscal 2017 was a transformative year for its digital and e-commerce business, with structural changes and investments in process and technology. Additionally, the expansion of omni-channel capabilities complements digital strategies. lululemon has so far launched the ‘ship from store’ capability in 186 locations, with further expansion planned in fiscal 2018.

lululemon vs. Industry

The above-mentioned factors clearly profess that lululemon still has significant growth potential in the days ahead. This is also evident from this Zacks Rank #3 (Hold) stock’s Growth Score of A and long-term earnings growth rate of 13%.

Three Top-Ranked Stocks in the Same Industry

Columbia Sportswear Company (COLM - Free Report) has a long-term earnings growth rate of 9.6% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Guess?, Inc. (GES - Free Report) , also a Zacks Rank #1 stock, has an impressive long-term earnings growth rate of 17.5%. Shares of the company have surged 34.4% year to date.

Tailored Brands, Inc. (TLRD - Free Report) has a long-term earnings growth rate of 16.5% and a Zacks Rank #2 (Buy). Furthermore, the company’s shares have rallied 29.7% year to date.

Zacks Editor-in-Chief Goes ""All In"" on This Stock

Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.

Download it free >>

More from Zacks Analyst Blog

You May Like