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Here's How lululemon (LULU) Looks Ahead of Q3 Earnings

Zacks Equity Research

lululemon athletica inc. LULU is slated to report third-quarter fiscal 2019 results on Dec 11, after the market closes.

The yoga-inspired athletic apparel company delivered a positive earnings surprise of 7.9% in the last reported quarter. Moreover, its bottom line beat estimates by 6.8%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for the company’s fiscal third-quarter earnings is pegged at 93 cents, suggesting growth of 24% from the year-ago quarter’s reported figure. Estimates have been unchanged over the past 30 days. The consensus estimate for fiscal third-quarter sales is pegged at $896.5 million, indicating 19.9% growth from the prior-year quarter’s reported figure.

lululemon athletica inc. Price and EPS Surprise

 

lululemon athletica inc. Price and EPS Surprise

lululemon athletica inc. price-eps-surprise | lululemon athletica inc. Quote

Key Factors to Note

lululemon’s merchandising policies and investments across sales channels have been contributing to the robust earnings trend. Apart from these, product innovation in new categories such as self-care, enhancement of omni-channel experience and sturdy international growth has been playing a vital role. Additionally, the impact of continued progress on the Power of Three strategic plan is expected to get reflected in its top and bottom-line results.

Notably, the company has been witnessing positive consumer response for its merchandise. Consequently, its women’s and men’s categories have been witnessing robust momentum and have been favoring its comparable sales (comps) trend. Additionally, management has been taking steps to boost business in North America that has been performing well for a while now. Consistent traffic growth has been a key catalyst in the region.

In the last reported quarter, lululemon had predicted revenues of $880-$890 million for the fiscal third quarter, with constant-dollar total comps increase in low-teens. The company envisions earnings of 90-92 cents per share, whereas it recorded 71 cents in the year-ago quarter.

However, it has been witnessing cost headwinds related to higher airfreight as well as tariffs, which might get reflected in margins. Additionally, the company expects earnings per share to face a 3-4 cent impact from these costs, which are likely to be evenly spread through the fiscal third and fourth quarters.

Zacks Model

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.

Although lululemon carries a Zacks Rank #3, its Earnings ESP of -0.07% makes surprise prediction difficult.

Stocks Likely to Beat Earnings Estimates

Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Costco Wholesale Corporation COST currently has an Earnings ESP of +1.01% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CarMax, Inc KMX presently has an Earnings ESP of +0.50% and a Zacks Rank #2.

Big Lots, Inc BIG currently has an Earnings ESP of +3.85% and a Zacks Rank #3.

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