Friday, September 9, 2011

Lululemon (LULU) Beats Nicely on Bottom Line, but Guidance Not Strong Enough for Such a High Multiple Stock

Lululemon (LULU) has been one of the stars of retail the past few years, and as a rare high grower has been handed a premium valuation.  Of course that carries more risk around earnings season, as these type of names usually need to beat and raise to keep the momentum going.  The company beat earnings estimates by a solid 4 cents but the guidance picture was not as rosy.  The stock is being hit, but it's not that bad all things considered - often when momo stocks disappoint you will see a 10-20% drop.

Even after today's drop the company trades at nearly 50x forward estimates.

Full report here.

Via IBD:

  • Fitness clothing shop Lululemon Athletica (LULU) continued its streak of better-than-expected earnings Friday, thanks to strong growth at its existing stores and a sharp increase in its direct-to-consumers online channel. But a cautious third-quarter outlook pressured shares.
  • The Canadian yoga and fitness clothier posted second-quarter earnings of 26 cents a share, up 73% from a year ago, after adjusting for this summer's stock split. Revenue came in at $212.3 million, up 39% from a year ago. Analysts were looking for 22 cents, on revenue of $206 million.
  • Sales at stores open more than a year climbed 20%.
  • However, Lululemon issued more cautious guidance for the third quarter, predicting earnings per share of 22-24 cents. Wall Street has expected 24 cents.
  • Demand for the specialty retailer's high quality but pricey yoga and running clothes has held strong, despite high fuel prices and other economic pressures on consumers. But Lululemon has struggled to keep its shelves stocked in recent quarters, chasing inventory and racking up higher shipping costs in the process.

Gross profit margin remains awesome (for a retailer) at nearly 60%!  Especially considering commodity prices have ran up this year.
  • Gross profit for the quarter increased 52% to $122.1 million, and as a percentage of net revenue gross profit increased to 57.5% for the quarter from 52.8% in the second quarter of fiscal 2010.

[Jun 20, 2011: Lululemon - No Recession in Yoga]

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