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Can Lululemon's (LULU) Solid Holiday Results Aid Q4 Earnings?

By Zacks Investment ResearchStock MarketsMar 19, 2019 09:21PM ET
Can Lululemon's (LULU) Solid Holiday Results Aid Q4 Earnings?
By Zacks Investment Research   |  Mar 19, 2019 09:21PM ET
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lululemon athletica inc. (NASDAQ:LULU) is slated to report fourth-quarter fiscal 2018 results on Mar 27, after the market closes.

Notably, the company has an impressive surprise history, having delivered seven consecutive earnings beat and 12 straight quarters of positive sales surprise. It also delivered average beat of 19.5% in the trailing four quarters.

What to Expect?

The Zacks Consensus Estimate for fiscal fourth-quarter earnings stands at $1.74 per share, mirroring 30.8% growth year over year. Over the past 30 days, the consensus mark has remained unchanged. The consensus estimate for revenues is pegged at $1,146 million, up about 23.7% from the year-ago quarter.

However, the lululemon stock has been witnessing some softness in the past month, indicating a negative sentiment ahead of earnings. Shares of the company fell 2.1%, wider than the industry’s decline of 0.6%. Nonetheless, the stock has mirrored profound strength in the past year, rallying about 79.7%. This was mainly backed by the smooth execution of the company’s strategies, which position it for compelling long-term growth.

Factors Likely to Influence 4Q18

lululemon has been progressing well with its strategy for 2020, which is significantly aiding its performance. This strategy is expected to boost growth via product innovation, building store fleet in North America, broadening of digital business and international expansion. This makes the company optimistic about ending fiscal 2018 on a strong note.

Simultaneously, lululemon is focused on enhancing the e-commerce retailing channel and investing in the innovation of product categories and bringing improvements to the website. Notably, improved capabilities in personalized digital marketing and data analytics led to traffic and conversion growth at the company’s site in the fiscal third quarter. With continued progress on e-commerce strategy, it remains on track to deliver $4 billion in revenues by 2020.

The company’s efforts to expand operations outside the United States and Canada, particularly in the underpenetrated markets of Europe and Asia, also provide a long-term growth opportunity. Reflecting solid progress on the international front, it recorded total market share growth of 50% each in Asia and Europe in the fiscal third quarter.

Particularly, the company witnessed solid e-commerce growth in China, where constant-dollar revenues improved 76% year over year in the fiscal third quarter. Apart from China, its growth efforts in Asia were highlighted by the opening of its first store in Osaka, Japan, and the launch of the local market e-commerce site in Korea.

In Europe, the company’s brand is resonating well with customers. It attracted guests in Berlin with a successful Sweatlife festival. Additionally, it opened a shop-in-shop in Le Bon Marche, a leading department store in Paris.

Expectations for the Upcoming Quarter

lululemon witnessed success this holiday season, driven by solid momentum in product offerings and initiatives. Backed by this performance, in January, the company perked up its guidance for fourth-quarter fiscal 2018.

For the fourth quarter of fiscal 2018, which mainly constitutes the holiday shopping season, lululemon projects net revenues of $1.140-$1.150 billion, up from $1.115-$1.125 billion mentioned earlier. On a constant-dollar basis, management expects total comparable store sales (comps) to grow in mid to high teens. Earlier, it anticipated comps growth in a high-single to low-double digit. Earnings per share are envisioned to be $1.72-$1.74, reflecting an increase from $1.64-$1.67 stated previously.

What Does the Model Say?

Our proven model does not conclusively show that lululemon is likely to beat earnings estimates in fourth-quarter fiscal 2018. A stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

lululemon has an Earnings ESP of 0.00% and a Zacks Rank #2. While the company’s favorable Zacks Rank increases the predictive power of Earnings ESP, an Earnings ESP of 0.00% makes surprise prediction difficult.

Stocks Likely to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

NIKE, Inc. (NYSE:NKE) has an Earnings ESP of +3.93% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darden Restaurants, Inc. (NYSE:DRI) has an Earnings ESP of +1.07% and a Zacks Rank #2.

PVH Corporation (NYSE:PVH) has an Earnings ESP of +1.14% and a Zacks Rank #3.

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lululemon athletica inc. (LULU): Free Stock Analysis Report

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Zacks Investment Research
Can Lululemon's (LULU) Solid Holiday Results Aid Q4 Earnings?

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Can Lululemon's (LULU) Solid Holiday Results Aid Q4 Earnings?

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