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Here's What to Expect from Lululemon (LULU) Q4 Earnings Wednesday

Benjamin Rains

Shares of Lululemon LULU slipped over 2% Tuesday, in a sign that some investors might be nervous about the yoga apparel and athleisure giant’s fourth quarter 2018 financial results that are due out after the closing bell on Wednesday. Some might be worried that Lululemon could fall short of revenue estimates after Nike NKE missed North American sales projections.

Overview

Overall, Lululemon stock has climbed 18% this year to outpace the S&P 500’s 12% jump and its industry’s 14% average expansion. As we mentioned at the top, shares of LULU closed regular trading down 2.06% at $143.56 on Tuesday, which marked a 13% downturn from their 52-week high of $164.79.

Nike saw its stock price sink late last week after it failed to match Wall Street estimates for its largest market. Despite the miss, Nike seemed to prove its strength and the stock is likely to bounce back. Investors should also note that Nike executives are ready to expand their women’s focused offerings in the athleisure age that has helped Lululemon stock soar over 120% in the last two years.

The Vancouver-based firm has diversified far beyond its yoga gear into outwear, shoes, accessories, as well as more work-appropriate and fashion-focused offerings for both men and women. Plus, Lululemon signed NFL quarterback Nick Foles earlier this month as its first men’s ambassador, an effort the firm hopes will attract consumers away from more traditional sportswear brands such as Nike, Adidas ADDYY, and Under Armour UAA. Meanwhile, its men’s and women’s jackets now compete against Canada Goose GOOS, V.F. Corporation’s VFC The North Face, Columbia Sportswear COLM, and other higher-end brands.

Lululemon is also testing out a new loyalty program and has jumped into the self-care industry with offerings such as deodorant and moisturizer. LULU management also raised its quarterly guidance earlier this year on the back of strong holiday period sales. With that said, investors and Wall Street will likely pay close attention to its e-commerce expansion and any updates on its growth in key Asian markets.  

 

 

Outlook & Earnings Trends

Our current Zacks Consensus Estimate calls for Lululemon’s Q4 revenue to climb 23.9% to reach $1.15 billion, which would come in above Q3’s 21% top-line growth. Meanwhile, the firm’s full-year 2018 revenues are projected to surge approximately 23% from fiscal 2017’s $2.65 billion to reach $3.27 billion. Last year, total full-year revenue popped 13%.

At the bottom end of the income statement, Lululemon is projected to see its adjusted Q4 earnings surge 30.8% to touch $1.74 a share. Plus, the athletic apparel company’s full-year EPS figure is expected to soar 44.4% to reach $3.74 a share. Once again, this would top 2017’s adjusted full-year earnings growth of 21%.

Investors should also note that LULU has seen some positive earnings estimate revision activity recently, which includes two positive revisions for Q4 in the last 60 days. Furthermore, Lululemon boasts an impressive history of earnings beats, with a 19.5% average quarterly EPS surprise over the trailing four periods.

 

 

Bottom Line

Lululemon is currently a Zacks Rank #3 (Hold) based in large part on its recent earnings estimate revision activity. LULU also boasts an “A” grade for Growth in our Style Scores system. Maybe more importantly in the short-term, Lululemon stock trades pretty heavily around earnings. This means that LULU could soar or slump based on Wednesday’s earnings release.

LULU is scheduled to release its Q4 and full-year 2018 financial after the closing bell on Wednesday, March 27. So, make sure to head back to Zacks for a complete breakdown of its actual metrics.

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