The yoga-themed apparel company updated its fourth-quarter guidance in January. EPS was projected to fall within the range of $0.71 to $0.73, compared to the previous guidance of $0.65 to $0.69. This was backed by improving trends and strong holiday results. Lululemon had said that it sees customers responding positively to both the women’s and men’s product assortment. It is also nearing completion for the build-out of its senior leadership team.
Based on how much of a battleground stock this has been, Thursday’s report will be a big one.
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In early February, former chairman Chip Wilson announced that he was resigning from the company’s board of directors. Wilson resigned as chairman in December 2013. In August of last year, Wilson agreed to sell approximately half his 27.7% stake in Lululemon to private equity firm Advent International for $844 million and to enter a standstill agreement that prohibited him from soliciting proxies until after the 2016 Lululemon stockholders meeting.
The shares have a consensus analyst price target of $63.25, implying upside of just 2%. A few analysts weighed in on Lululemon in the week prior to the earnings report:
- Topeka Capital Markets reiterated a Buy rating.
- Canaccord Genuity maintained a Hold rating and lowered its price target to $55 from $58, implying a downside of 11% from current prices.
- Deutsche Bank reiterated a Hold rating with a price target at $56
The 50-day moving average (MA) crossed over the 200-day MA in mid-December, and since then shares made a strong push up from around $50 to over $60. Currently the 50-day MA is above the share price at $64.98. However, shares have been testing the 50-day MA since early March. The 200-day MA now seems mostly immaterial at $48.79.
Weekly options are priced showing a wide move is expected. The implied volatility was over 100% on all the close strike price puts and calls, and it appeared that options traders were braced for a move of more than $4.00 in either direction.
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So, what about short sellers? This looks like a small change, but it is significant. Lululemon saw its short interest decrease slightly for the most recent settlement date to 14.3 million, with 7.1 days to cover. The previous reading was 14.5 million with 11.7 days to cover. Note that this is the lowest short interest in the past year.
Shares of Lululemon were trading down 2% at $61.80 in Tuesday’s noon hour, in a 52-week trading range of $36.26 to $68.99.
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