Financial Trading Blog
Lululemon Earnings Preview
Athleisure sales have remained resilient so far this year, but can that momentum continue in the more crucial second half of the year.
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The good news…
Last quarter, Lululemon raised its guidance for the year and guided increased sales for the current quarter when compared to the prior year. The company's forecasts are actually slightly below the market's current assessment, meaning there is a chance that it could beat its own expectations.
The consensus among analysts is that Lululemon will report EPS of $1.86, after forecasting $1.82-1.87. On the top line, the consensus is even better, expecting $1.8B in sales compared to Lululemon's own forecast of $1.75-1.78B in sales.
Keeping things going
Where analysts are a little worried is around the company's relatively higher price point, and trends seen by competitors saw consumers looking for better pricing. Rivals such as UnderAmor, Adidas, and FootLocker either missed estimates or cut guidance. If Lululemon has to cut guidance now right after raising it, there might be some concern about management, and that could further drag on the stock price.
The main metrics that investors tend to track with Lululemon are comparable sales, which typically rise in the double-digit level. Direct-to-consumer sales typically outperform retail sales, which is another metric that could get investor attention. With the latest trends in retail sales, there might also be some increased interest in inventory, with a build potentially sending worries that the company might have to cut prices.
Lulu's upside lacked momentum
Key takeaways
Lululemon raised its guidance for the year and may beat its own EPS and sales expectations. The firm might feel the heat from competitive pressures due to its higher price point as rivals either missed estimates or cut guidance. Investors will want to see whether the company cuts guidance or not, and will keep a close eye on inventories to get a sense of the metric. Otherwise, comparable and direct-to-consumer sales might raise some concerns about management.
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