Back to top

Is lululemon (LULU) Poised to Beat Q3 Earnings Estimates?

Read MoreHide Full Article

lululemon athletica inc. (LULU - Free Report) is slated to report third-quarter fiscal 2018 results on Dec 5.

Notably, the company has an impressive surprise history, having delivered six consecutive earnings beat and 11 straight quarters of positive sales surprise. The company also delivered a trailing four-quarter average beat of 19.2%.

What to Expect?

The Zacks Consensus Estimate for fiscal third quarter earnings stands at 69 cents per share, mirroring 23.2% growth year over year. Over the past 30 days, the consensus mark witnessed upward revisions. Management envisions earnings per share of 65-67 cents for the same period.

The consensus estimate for revenues is pegged at $733 million, up about 18.4% from the year-ago quarter. The company anticipates revenues of $720-$730 million for the to-be-reported quarter.

For third-quarter fiscal 2018, lululemon projects constant-dollar comparable store sales to increase in low-teens range. Gross margin is expected to improve 100 basis points (bps) driven by higher product margins coupled with incremental reduction in average unit costs. Management anticipates SG&A expenses to deleverage by about 100 bps.

So far in 2018, shares of this yoga-inspired athletic apparel retailer have surged 56.3%, significantly outperforming the industry’s 7.8% rally.

Factors Likely to Influence 3Q18

lululemon has been progressing well with its strategy for 2020, which is significantly aiding the company’s performance. This strategy is expected to boost growth via product innovations, building store fleet in North America, broadening of digital business and international expansion. Its solid focus on ivivva’s remodeling is also impressive.

Additionally, lululemon remains keen on enhancing e-commerce retailing channel and bringing improvements to its website. The company’s digital business is also benefiting from site re-launch, delivering double-digit increase in conversion rate in the last reported quarter. Driven by the ongoing strength in e-commerce, traffic at the company’s site improved more than 20%. Further, the expansion of omni-channel capabilities complements its digital strategies. As part of this, lululemon allows catering in-store demand from e-commerce inventory.

The company’s ‘ship from store’ capability is gaining traction as well. lululemon is also on track to roll out the ‘buy-online pick-up in-store’ functionality in the second half of fiscal 2018.

The company’s efforts to expand operations outside the United States and Canada, particularly in the underpenetrated European and Asian markets, also bode well. With regard to expansion plans in Asia, the company introduced WeChat store in China in the fiscal second quarter and is on track to launch e-commerce sites in Korea and Japan in late fiscal 2018. Overall, lululemon intends to expand international base by opening 20-25 stores in fiscal 2018.

Why a Likely Positive Surprise?

Our proven model shows that lululemon is likely to beat earnings estimates in third-quarter fiscal 2018. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

lululemon athletica inc. Price, Consensus and EPS Surprise

lululemon athletica inc. Price, Consensus and EPS Surprise | lululemon athletica inc. Quote

lululemon has an Earnings ESP of +4.89% and a Zacks Rank #2.

Other Stocks Likely to Beat Earnings Estimates

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat.

Boot Barn Holdings, Inc. (BOOT - Free Report) has an Earnings ESP of +6.85% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco Wholesale Corporation (COST - Free Report) has an Earnings ESP of +3.09% and a Zacks Rank #3.

The Michaels Companies, Inc. (MIK - Free Report) has an Earnings ESP of +2.86% and a Zacks Rank #3.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.  

Click here for the 6 trades >>

More from Zacks Analyst Blog

You May Like