Earnings Preview: Lululemon Athletica likely to post upbeat results for Q3

Athletic apparel retailer Lululemon Athletica (LULU) is set to report its earnings for the third quarter on Thursday after the market close. The company is expected to post upbeat earnings backed by higher revenue and comparable sales growth. The retailer has changed the reporting date of its results from Wednesday due to the market closing in observance of a day of mourning to honor late President George H.W. Bush.

Analysts, on average, expect the retailer to post earnings of $0.69 per share on revenue of $736.14 million for the third quarter. In comparison, during the previous year quarter, the company reported a profit of $0.56 per share on revenue of $619.02 million. Majority of the analysts recommended a “strong buy” or “buy” rating on the stock with an average price target of $163.14.

The yoga-clothing maker’s bottom line is expected to be benefited by higher revenue as well as an increase in comparable store sales. The company is likely to continue delivering strong results for the third quarter and this positions it to achieve its 2020 goals and beyond.

For the second quarter, Lululemon Athletica posted a 97% jump in earnings helped by higher revenue and a 20% increase in comparable sales. Comparable store sales rose 10% and direct to consumer net revenue climbed 48%. Net revenue grew 25% year-over-year helped by its consistent performance of its business.

For the third quarter, the company had expected net revenues in the range of $720 million to $730 million. This is based on total comparable sales growth in the low teens on a constant dollar basis. Earnings are anticipated to be in the range of $0.65 to $0.67 per share. This forecast assumed 133 million diluted weighted-average shares outstanding and a 30% tax rate.

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For the full year 2018, Lululemon predicted net revenue in the range of $3.185 billion to $3.235 billion based on a total comparable sales increase in the low teens on a constant dollar basis. Earnings are forecast to be in the range of $3.45 to $3.53 per share. This assumed 134 million diluted weighted-average shares outstanding and a 30% tax rate.

The company ended the second quarter with 415 stores, up from 411 stores at the end of the first quarter. As of January 28, 2017, the company had operated 404 company-operated stores under the Lululemon and Ivivva brands in the United States, Canada, Australia, the United Kingdom, New Zealand, China, Singapore, Japan, Ireland, South Korea, Germany, and Switzerland.

During the mid-September, Lululemon Athletica promoted Sun Choe to the role of Chief Product Officer. Choe joined the company in 2016 as SVP of Global Merchandising and subsequently assumed expanded responsibilities for all product functions on an interim basis. Prior to joining Lululemon, Choe served as Chief Global Product Merchant at Marc Jacobs and also served in senior merchandising roles at successful brands, including Urban Outfitters, West Elm, and Madewell.

Shares of Lululemon Athletica opened higher on Monday and is trading in the green territory. The stock has risen over 72% in the year so far and over 101% in the past year.

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