What to Look For in Lululemon Earnings

Lululemon Athletica Inc. (NASDAQ: LULU) is scheduled to report its fiscal third-quarter financial results before the markets open on Thursday. The consensus estimates from Thomson Reuters call for $0.37 in earnings per share (EPS) on $482.13 million in revenue. In the same period of the previous year, it posted EPS of $0.42 and $419.40 million in revenue.

This yoga-themed athletic apparel retailer was a top stock from March 2009 to May 2012. But from May 2012 to June 2014 the company suffered from upheavals at the CEO slot and other corporate issues that bogged down growth.

The company finally achieved comparable-store sales growth of 5% at brick-and-mortar locations recently, its first quarter of positive growth for the metric in more than a year. At the same time, Lululemon demonstrated broad strength from not only its core women’s line, but also in its men’s business and kid-centric ivivva brand.

In the most recent report, same-store sales on a currency-neutral basis were better than expected, while online sales rose 35% on the same basis. As of the fiscal second quarter, direct to consumer sales now make up 18.2% of Lululemon’s total sales, but this is down from 19.7% sequentially. The specialty retailer does an incredible 19% of total store sales via e-commerce. That is the second-highest among companies in the luxury and accessories retail category.

Ahead of its earnings a few analysts weighed in on Lululemon:

• MKM Partners reiterated a Buy rating.
• Credit Suisse reiterated a Buy rating with a $64 price target.
• Deutsche Bank reiterated a Hold rating.
• Canaccord Genuity has a Hold rating but lowered its price target to $52 from $54.
• FBR downgraded it to an Underperform from Market Perform and lowered the price target to $42 from $55.

So far in 2015, Lululemon shares have underperformed the market, with shares are down 7% year to date, but over the past 52 weeks shares are up nearly 14%.

Shares of Lululemon were trading at $51.88 Tuesday, on its 52-week trading range of $43.14 to $70.00. The stock has a consensus analyst price target of $63.94.
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