Post-Earnings Coverage Lululemon Athletica Optimistic

LONDON, UK / ACCESSWIRE / June 9, 2016 / ActiveWallSt.com announces its post-earnings coverage on Lululemon Athletica Inc. (NASDAQ: LULU). On Wednesday, June 08, 2016, the company announced its Q1 FY16 results that beat analysts’ expectations, which lead the yoga wear maker to also raise its financial forecasts for the Fiscal year. Register with us now for your free membership and see our complete coverage on this equity at:

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For the period ending on May 1, 2016, Lululemon posted net income of $45.3 million, or $0.33 per share, as compared with net income of $47.8 million or $0.34 per share in Q1 FY15. Revenue rose by 17% to $495.5 million from $423.5 million, beating analysts’ estimates of $487.7 million. Excluding special items, the British Columbia-based company reported profit of $0.30 per share, marginally below analysts’ consensus estimates of $0.31.

Today, ActiveWallSt.com is promoting its earnings coverage on LULU. Get all of our free coverage by signing up to http://www.activewallst.com/register/.

Lululemon sees earnings move downward

Lululemon reported that total comparable sales, rose by 6 % or 8 % on a constant dollar basis in Q1 FY16, compared with 6 % in Q1 FY15. Same store sales, which consider sales in the stores opened at least for a year, were up 3% or by 5% on constant currency basis. The company incurred foreign exchange losses of $13.5 million during Q1 FY16 due to revaluation of cash and receivables held in Canada.

Lululemon’s gross margin rate dropped to 48.3% in Q1 FY16 from 48.6% in the year ago period. The athleisure maker has worked towards rebuilding its image after struggling in recent years with product recalls, which embarrassed the company, and inventory related issues.

Top line Worries

While top line sales growth grew, partly due to opening of new stores, inventory levels also jumped 21% to $286.2 in Q1 FY16 million from 236.5 million in Q1 FY15. This states that more inventory is getting held in Lululemon’s pipeline, depreciating in value and shrinking margins. To deal with this, in Q1 FY16, the company sold $39.2 million worth of discounted merchandise through various channels such as pop up stores, warehouse sales and its own stores as compared to $25.8 million in the year ago period.

Lululemon, which has positioned itself as a luxury brand, never used to offer discounted sales in its stores. Having to resort to discounted sales to clear merchandize is critical as price markdowns can change consumer perception about the Lululemon brand. However, with the ever-changing fashion trends and increased competition from Nike Inc. (NYSE:NKE) and Under Armour Inc. (NYSE:UA) within the lucrative athleisure market, Lululemon has to keep up with the trend. For this the company has to speed up its inventory pipeline, and this comes with a caveat as with limited space in its stores the older clothes have to be replaced even faster, thereby reducing their value.

Can Lululemon Keep up the Momentum

For FY16, Lululemon increased its forecast to a range of $2.08 to $2.18 per share from previous guidance of $2.05 to $2.15. The company also forecast revenue of $2.31 billion to $2.35 billion, compared with prior forecast of $2.29 billion to $2.34 billion issued in March 2016. Lululemon opened 11 new stores during Q1 FY16, closing just one and bringing its overall store count to 373 as of May 1, 2016.

Intraday Chart – 08 June, 2016

Daily Stock Price Chart

Lululemon’s stock jumped 4.90% closing at $71.48 on the NASDAQ exchange on June 08, 2016 post its earnings release. The company’s shares have gained 36.23% since the beginning of the year.

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