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Will Lululemon (LULU) Stock Continue Its Run After Q3 Earnings?
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Lululemon (LULU - Free Report) will report its third quarter financial performance after the market closes on Wednesday, December 11. The athleisure retailer’s shares have soared over 88% in 2019, significantly outpacing the broader apparel market’s 22.5% run.
LULU stock touched a new 52-week high of $233.52 per share on Monday. Lululemon has been one of the more prolific stocks in the past five years, up over 390%, easily outperforming the S&P 500’s 57% run.
Athleisure’s Growth Fuels Lululemon
Lululemon has been one of the best performing retail stocks of the year thanks in part to the substantial growth of the athleisure market. Lululemon’s revenue jumped 21.2% through the first half of the year to $1.67 billion.
At the same time, its gross margin improved 50 basis points to 54.5%. On top of that, its operating margin improved 40 basis points to 17.8%, and Lululemon's earnings per diluted share of $1.69 were 34% higher than last year.
In the second quarter, Lululemon saw its comparable store sales increase by an 15%, which was driven by a 30% increase in direct-to-consumer revenue. Second-quarter diluted earnings grew 35.2% to $0.96 per share.
Lululemon has seen success with its latest menswear launches, as well as its digital sales channel. The company has also delved into new categories like outerwear and has targeted new international markets that can help extend its growth runway.
Digital and International Expansion
The company’s spectacular performance has driven its stock to trade at 48X forward earnings, which towers above the industry average of 15X. The stock’s YTD run and rich valuation sets the stage for its upcoming report as Wall Street will look for Lululemon to report a quarterly performance that justifies investors’ optimism.
Investors will also likely closely monitor Lululemon’s profit margins in its upcoming third quarter report. Through the first two quarters of the year, the direct-to-consumer channel made up a quarter of total revenue and generates much higher margins than physical stores. The margin opportunity of the digital channel adds to the importance of continued growth in the category.
Lululemon’s international expansion is also a vital component of the company’s long-term success and management believes it can maintain international revenue growth above 30% over the next few years. The company’s international regions all operate at a profit except, the European region, which operates at a small loss.
Management noted during the Q2 conference call that its European business is quickly marching toward profitability. Lululemon recently launched a new e-commerce site in Germany and France that can potentially kickstart the firm’s profitability efforts in the region.
Outlook
Our Q3 consensus estimates call for earnings to increase 24% to $0.93 per share and for net revenue to climb 19.91% to $896.5 million.
Our Q4 estimates, which include the crucial holiday season, project a top-line gain of 13% to $1.32 billion and a bottom-line hike of 14% to $2.11 per share.
Bottom Line
Lululemon has been on a tear this year. The company’s digital and international expansion will be vital to its continued success, as the athleisure market grows on a global scale. The efficiency in which Lululemon has conducted its impressive growth is another reason why investors have poured into the stock.
However, the amount of praise around Lululemon’s business naturally raises expectations for its upcoming Q3 report. Our estimates anticipate top and bottom-line growth to continue in the next two quarters, which can potentially catapult the stock to new highs. Additionally, the company has seen its earnings estimates revised higher recently, helping earn LULU stock a Zacks Rank #2 (Buy).
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Image: Bigstock
Will Lululemon (LULU) Stock Continue Its Run After Q3 Earnings?
Lululemon (LULU - Free Report) will report its third quarter financial performance after the market closes on Wednesday, December 11. The athleisure retailer’s shares have soared over 88% in 2019, significantly outpacing the broader apparel market’s 22.5% run.
LULU stock touched a new 52-week high of $233.52 per share on Monday. Lululemon has been one of the more prolific stocks in the past five years, up over 390%, easily outperforming the S&P 500’s 57% run.
Athleisure’s Growth Fuels Lululemon
Lululemon has been one of the best performing retail stocks of the year thanks in part to the substantial growth of the athleisure market. Lululemon’s revenue jumped 21.2% through the first half of the year to $1.67 billion.
At the same time, its gross margin improved 50 basis points to 54.5%. On top of that, its operating margin improved 40 basis points to 17.8%, and Lululemon's earnings per diluted share of $1.69 were 34% higher than last year.
In the second quarter, Lululemon saw its comparable store sales increase by an 15%, which was driven by a 30% increase in direct-to-consumer revenue. Second-quarter diluted earnings grew 35.2% to $0.96 per share.
Lululemon has seen success with its latest menswear launches, as well as its digital sales channel. The company has also delved into new categories like outerwear and has targeted new international markets that can help extend its growth runway.
Digital and International Expansion
The company’s spectacular performance has driven its stock to trade at 48X forward earnings, which towers above the industry average of 15X. The stock’s YTD run and rich valuation sets the stage for its upcoming report as Wall Street will look for Lululemon to report a quarterly performance that justifies investors’ optimism.
Investors will also likely closely monitor Lululemon’s profit margins in its upcoming third quarter report. Through the first two quarters of the year, the direct-to-consumer channel made up a quarter of total revenue and generates much higher margins than physical stores. The margin opportunity of the digital channel adds to the importance of continued growth in the category.
Lululemon’s international expansion is also a vital component of the company’s long-term success and management believes it can maintain international revenue growth above 30% over the next few years. The company’s international regions all operate at a profit except, the European region, which operates at a small loss.
Management noted during the Q2 conference call that its European business is quickly marching toward profitability. Lululemon recently launched a new e-commerce site in Germany and France that can potentially kickstart the firm’s profitability efforts in the region.
Outlook
Our Q3 consensus estimates call for earnings to increase 24% to $0.93 per share and for net revenue to climb 19.91% to $896.5 million.
Our Q4 estimates, which include the crucial holiday season, project a top-line gain of 13% to $1.32 billion and a bottom-line hike of 14% to $2.11 per share.
Bottom Line
Lululemon has been on a tear this year. The company’s digital and international expansion will be vital to its continued success, as the athleisure market grows on a global scale. The efficiency in which Lululemon has conducted its impressive growth is another reason why investors have poured into the stock.
However, the amount of praise around Lululemon’s business naturally raises expectations for its upcoming Q3 report. Our estimates anticipate top and bottom-line growth to continue in the next two quarters, which can potentially catapult the stock to new highs. Additionally, the company has seen its earnings estimates revised higher recently, helping earn LULU stock a Zacks Rank #2 (Buy).
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>