What to watch for in the Q2 post on Lululemon stocks?

[Note: Lululemon fiscal year ends January]

lululemon (NASDAQ: LULU), a company that designs and sells sports and leisure apparel, is expected to release its fiscal first quarter results on Thursday, September 1. We anticipate that LULU stock will likely see little to no movement due to revenue and earnings barely meeting market expectations. Retail stocks have continued to come under pressure in the second quarter of late as economic headwinds coupled with inflation have intensified. Lululemon’s gross margin declined sequentially and year-over-year to 53.9% in the first quarter, and it expects this year-over-year contraction to continue in the second quarter and over the whole year. He attributes the squeeze to higher air freight costs, supply chain constraints and increased investment in direct-to-consumer (DTC) channels. However, it still expects that figure to remain roughly flat for the full year from fiscal 2021, even as higher costs squeeze its gross margins. The athleisure company’s extensive sales force helps it fend off most of its headwinds at the margins. The retailer has effectively allayed concerns of post-pandemic disappointment with consumer shopping habits.

Lululemon launched a new five-year growth plan in April 2022, the “Power of Three x2” plan, which aims to approximately double its annual revenue from $6.3 billion in fiscal 2021 to $12.5 billion. dollars by fiscal year 2026. The retailer plans to achieve this goal. doubling its male and digital revenue as well as quadrupling its international revenue – compared to fiscal year 2021.

Our forecast indicates that Lululemon’s valuation is $300 per share, which is a fair price compared to the current market price. Watch our interactive dashboard analysis at Lululemon Earnings Snapshot: What to Expect in Fiscal Q2? for more details.

(1) Expected revenue in line with consensus estimates

Trefis estimates Lululemon’s Q2 2022 revenue at around $1.76 Bill, corresponding to the consensus estimate. The company posted net sales of $1.6 billion in the first quarter, a 32% jump from a year earlier, as same-store sales rose 28%. Lululemon’s revenue was supported by a 32% increase in North American sales and a 29% increase in international sales. For the second quarter, Lululemon expects revenue to grow 17% to 18% year over year. For the full year, the company expects its revenue to grow by 21% to 22%. We expect Lululemon’s revenue to be $7.6 billion for the full year 2022, up 22% year-on-year.

2) EPS likely to match consensus estimates

Lululemon’s Q2 2022 earnings per share (EPS) is expected to be $1.85 per Trefis analysis, in line with the consensus estimate. The company expects its adjusted earnings per share (EPS) to rise 10% to 13% year over year in the second quarter and 20% to 22% for the full year. The company reported diluted EPS of $1.48 in the first quarter of 2022, compared to $1.16 in the first quarter of 2021. While operating margin fell 40 basis points in the first quarter, management was confident in the power pricing and the overall ability to weather inflationary impacts. Lululemon generated a gross margin of 53.9% in the first quarter of 2022, well above many of its industry peers such as Nike and Gap, which posted gross margins of 46.6% and 31.5%, respectively. , in their last trimesters.

(3) Estimation of the stock price at an appropriate price relative to the current market price

Based on our valuation of Lululemon, with an estimated EPS of around $9.40 and a P/E multiple of 31.9x for FY22, this translates to a price of $300, or just 2% less than the current market price.

It helps to see how your peers compare. Find out how Lululemon Peers price on the measures that matter. You will find other useful comparisons for companies in all sectors on Peer comparisons.

What if you were looking for a more balanced portfolio instead? Our quality portfolio and multi-strategy portfolio have consistently beaten the market since the end of 2016.

Return August 2022
MTD [1]
YTD [1]
Total [2]
Back to LULU -1% -21% 373%
S&P 500 return -3% -16% 79%
Trefis Multi-Strategy Portfolio -3% -16% 236%

[1] Cumulative monthly and cumulative annual as of 08/30/2022
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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