lululemon athletica inc. LULU is slated to report first-quarter fiscal 2020 results on Jun 11, after market close. The yoga-inspired athletic apparel company delivered a positive earnings surprise of 1.3% in the last reported quarter. Moreover, its bottom line beat estimates by 4.2%, on average, in the trailing four quarters.
The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings is pegged at 27 cents, suggesting a decline of 63.5% from the year-ago quarter’s reported figure. Earnings estimates have been unchanged in the past 30 days. The consensus estimate for fiscal first-quarter sales is pegged at $706.7 million, indicating a 9.7% decline from the prior-year quarter’s reported figure.
Key Factors to Note
lululemon’s first-quarter fiscal 2020 results are expected to reflect the adverse effects of the coronavirus pandemic. The pandemic resulted in store closures and limited operating hours across North America, Europe, Malaysia, Australia, Mainland China and New Zealand for most parts of the fiscal first quarter. In Feb 2020, the company temporarily closed all of its retail locations in Mainland China. In Mar 2020, stores across North America, Europe, Malaysia and New Zealand as well as its distribution center in Sumner, WA, were closed. This is likely to have dealt a huge blow on the company’s top line for the to-be-reported quarter.
On the last reported quarter’s earnings call, management expected its results for the fiscal first quarter to be negatively impacted by store closures, especially in North America as the region accounts for a major portion of its revenues. Moreover, lululemon’s aggressive efforts related to the men's clothing category and expansion of new products have been disrupted due to the ongoing crisis, which is expected to get reflected in the company’s fiscal first-quarter results.
Nevertheless, it expects to emerge strong post the coronavirus outbreak, driven by its online strategy and strong liquidity position. The company used its online channel as the key tool to emerge stronger during the coronavirus pandemic in China. Notably, its digital business promptly met consumer demands through its efficient distribution network and supply-chain investments. It also used the online channel to offer virtual yoga, meditation, pilates, dance and training classes for guests.
The company later used the strategy to bolster business in North America, Europe, Malaysia and New Zealand in the tough times. In the first week of store closures in North America and Europe, it saw 170,000 new guest enrollments for its live classes on Instagram. The strategy has given lululemon an edge of remaining connected with its guests during this time and providing a solid base for growth in the post coronavirus recovery market.
In fact, the company has witnessed increased demand for yoga mats and blocks in times of quarantine. Moreover, store closures led to a rise in social media followers for its popular yoga classes. The strategy is likely to have bolstered its digital sales in the fiscal first quarter, partly offsetting the decline from store closures.
Meanwhile, the company’s fiscal first-quarter results are likely to have gained from store re-openings in China from early March. As of April-end, its fleet of stores in China was almost fully operational. Consequently, the company’s China business is likely to have contributed meaningfully the fiscal first-quarter results, with robust growth witnessed both in stores and online.
Our proven model does not conclusively predict an earnings beat for lululemon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
lululemon has a Zacks Rank #3 and an Earnings ESP of -19.69%.
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Fastenal Company FAST currently has an Earnings ESP of +2.37% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Carnival Corporation CCL presently has an Earnings ESP of +2.13% and a Zacks Rank #3.
Caseys General Stores, Inc. CASY currently has an Earnings ESP of +40.82% and a Zacks Rank #3.
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Click to get this free report Carnival Corporation (CCL) : Free Stock Analysis Report Fastenal Company (FAST) : Free Stock Analysis Report lululemon athletica inc. (LULU) : Free Stock Analysis Report Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research