Lululemon (LULU) Reports After Close: Can They Exceed Agressive Expectations?

Lululemon (NASDAQ:LULU) is reporting Q1 earnings after market close today and traders are preparing for a big move. Over the past 4 quarter, LULU has moved double-digit percentages on earnings reports, keeping investors and traders on their toes.

LULU is expected to report an EPS of $0.71 along with revenues of $757 million, illustrating a 29% year-over-year (YoY) increase in EPS and a 16.5% growth on the top-line. Lululemon has beaten top-line estimates every quarter since 2016 and only missed on 1 EPS estimate by less than a percent, but keep in mind that this miss led to an over 20% drop in stock price.

Company Overview

LULU is a diamond in the retail rough, propelling ostensibly unending growth. Lulu is a lifestyle brand that has rooted itself into the millennial culture, something other retailers have only dreamed. Lululemon has become synonymous with active and healthy living, which appears to be the basis of the shifting consumer’s focus.

The brand started as a yoga studio in Vancouver at the end of the 90s and is now a multinational corporation operating 440 stores in 14 different countries. They operate an omni-channel business to meet the new generation’s consumption patterns, with over 25% of their revenue being driven by direct to consumer sales (aka e-commerce).

E-commerce sales grew 45% from last year and are expected to continue this prolific trend as more and more retail revenue is being driven by our increasingly online lifestyles. This is good news for a retailer like this if a customer doesn’t have to leave their home to consume it takes a lot fewer steps for Lululemon to capture a spontaneous purchase.

Performance

LULU (blue) has been outperforming the market (green) and the industry (red), demonstrating over 350% growth over the past 5-years and 40% since just the start of 2019, more than doubling any other benchmark. Below you can see LULU's year-to-date performance compared with its top peers: Ralph Lauren (NYSE:RL) , Canada Goose (NYSE:GOOS) , and Gap (NYSE:GPS) .

LULU has been a Zacks Rank #1-2 (Strong Buy - Buy) for 11 out of the past 12 months, as sell-side analysts perpetually push EPS estimates north.

Take Away

Lululemon continues to impress investors and analysts alike driving expectations up aggressively. The firm is expected to have robust double-digit growth figures for both the top and bottom lines over the next 3 years, even with our economic cycle expecting to come to an end. I believe that analysts are looking for a beat on both metrics this evening as well as strong forward guidance.

Some key points to look out for are same-store sales growth as well as a solid increase in e-commerce driven revenue. New store openings and anticipated openings are going to be signal that the business is expecting its steady expansion to continue.

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