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Lululemon (LULU) Soars to New Highs After Q2 Earnings Beat

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Lululemon (LULU - Free Report) reported Q2 earnings after the closing bell on Thursday, which sent the stock soaring to new all-time highs. The company has surged over 64% since the start of the year, massively outpacing the S&P 500’s YTD gains.

The athletic wear company has been able to thrive despite the broad struggle the retail sector has faced, and has taken advantage of the consumer’s continued preference for comfortable athletic wear. Lululemon also opened their largest store in Chicago in July, where customers can not only shop, but can also get a workout in or get a drink from their in-store juice bar.

Let’s take a closer look at how the company did in Q2 and where they might be headed in the near future.

Q2 Performance and Company Outlook

Earnings jumped 35.2% to $0.96 per share, beating our estimate by 7.87%. Revenue surged 22% to $883 million. The company’s net income rose 30.5% to $124.99 million.

The athleisure giant saw solid growth in their men’s clothing, something they have not been associated with before. Their men’s business was a key growth driver in the quarter as it climbed 35%, outperforming the growth of their women’s apparel who gained 21% in the second quarter. Same store sales grew by 15%, while sales in store went up 10% and direct to consumer sales spiked 30%. The company opened an additional 5 stores during the quarter bringing their total to 460.

As a result of their better than expected quarterly performance, Lululemon updated their full fiscal year guidance. The company now expects full-year net revenue to come in between $3.8-$3.84 billion compared to their previous guidance of $3.73- $3.77 billion. On the earnings front, they are now anticipating earnings to come in between $4.63 and $4.70, up from a range of $4.51 to $4.58.

Our Zacks consensus estimates currently project for Lululemon’s sales to grow by 15.26% to $861.7 million and for earnings to climb 18.67% to $0.89 in Q3. Looking ahead to their full fiscal year, our estimates anticipate for revenue to rally 15.56% to $3.8 billion and for the company’s bottom line to leap 20.83% to $4.64 per share. LULU has surpassed our estimates for the past 10 straight quarters and has an average EPS surprise of 6.78% over the previous four quarters.

Bottom Line

Lululemon has been on an absolute tear this year and looks poised to continue their tremendous run. The company has benefitted heavily from their recent investments in store openings, and these new experience-type stores that offer a variety of services are part of Lululemon’s growth strategy to expand into new categories, like personal care. LULU is sitting at a Zacks Rank #3 (Hold) and looks determined to continue their impressive growth.

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