lululemon athletica inc’s (LULU - Free Report) strategy for 2020, focus on ivivva’s remodeling, product innovation, e-commerce growth, international expansion and the introduction of new store formats have been the catalysts to its recent success. Moreover, the company’s robust surprise trend and optimistic outlook have boosted investors’ confidence in the stock.
This led to an upsurge in the stock price, which also hovers close to its 52-week high. The stock has rallied 49.3% in the last three months, outperforming the industry’s growth of 14.2%. Additionally, this Vancouver-based company has gained 19% since May 31, following the robust first-quarter fiscal 2018 results and raised view for fiscal 2018.
This shows that the momentum of the stock is intact after lululemon reported excellent first-quarter fiscal 2018, mainly driven by synergies from product innovation, international expansion and digital acceleration, which collectively reflect strength of the company’s business. Additionally, results gained from improvements in product margins and cost efficiencies within the company’s supply chain. Notably, first-quarter fiscal 2018 marked the company’s fifth consecutive earnings beat while sales topped estimates for the 10th straight quarter.
In fiscal 2018, the company is likely to witness strong momentum across its business while successfully executing on its growth strategies. Consequently, it provided an encouraging outlook for the second quarter and raised its view for fiscal 2018.
Estimates Trend Up
Driven by the robust fiscal first quarter and raised view for fiscal 2018, analysts have become optimistic on the stock, as evident from the uptrend in its earnings estimates. In the last seven days, the company’s Zacks Consensus Estimate of 46 cents and $3.16 for the second quarter and fiscal 2018 moved north by a penny and 7 cents, respectively. Management envisions earnings per share of 46-48 cents for the second quarter and $3.10-$3.18 for the fiscal.
Strategies Support lululemon’s Growth
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 achieve these, management outlined four distinct growth strategies, including product innovation, building store fleet in North America, broadening digital business and international expansion. With more customers turning to online portals, the company expects this channel to account for more than one-third of its sales by 2020.
With regard to international expansion, 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 2020. The company plans to expand the international base by opening 20-30 stores in fiscal 2018. Thus, the company believes that it is well positioned for persistent growth and improved profitability over the next five years.
lululemon is strongly focused on enhancing the e-commerce retailing channel. Further, it is investing in the innovation of new product categories and improving its website. Notably, the company’s investments in website and mobile capabilities helped deliver 20% increase in e-commerce conversion in the fiscal first quarter. This was further amplified by 30% increase in traffic, driven by improved product assortments and digital marketing initiatives. Consequently, e-commerce comps surged 62% (an increase of 60% in constant dollars) in first-quarter fiscal 2018.
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 #2 (Buy) stock’s Momentum Score of A and long-term earnings growth rate of 13.3%.
Looking for More Trending Picks? Look at These
Some other top-ranked stocks in the same industry are Columbia Sportswear Company (COLM - Free Report) , Guess?, Inc. (GES - Free Report) and Tailored Brands Inc. (TLRD - Free Report) . While Columbia Sportswear and Guess? sport a Zacks Rank #1 (Strong Buy), Tailored Brands carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Columbia Sportswear has pulled off an average positive earnings surprise of 18.1% in the last four quarters. The company has long-term earnings growth rate of 11.1%.
Guess?, with an impressive earnings growth rate of 17.5%, has delivered an average positive earnings surprise of 29% in the trailing four quarters.
Tailored Brands has long-term earnings growth rate of 16%. Further, the company’s earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 50.9%.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>