lululemon athletica inc. LULU clearly appears to be a preferred pick, given its efforts to remain on growth trajectory. Notably, the company is benefiting from solid progress on the Power of Three strategic plan, which aims at doubling sales in the men’s and digital categories, and quadrupling revenues in the international unit by 2023. Also, its focus on product innovation and international growth bode well.
All these factors also helped the company to retain its positive streak in third-quarter fiscal 2019, with sales and earnings surpassing the Zacks Consensus Estimate and improving year over year. Results were aided by positive response to merchandise assortments along with continued investments to bolster business growth.
Moreover, fourth-quarter fiscal 2019 earnings guidance looks encouraging. lululemon now projects fiscal fourth-quarter revenues of $1.370-$1.380 billion compared with $1.315-$1.330 billion mentioned earlier. The guidance is based on constant-dollar comparable store sales (comps) growth of mid-to-high teens compared with comps growth of low double digits stated earlier. Further, the company now projects earnings per share of $2.22-$2.25, up from $2.10-$2.13 mentioned earlier.
In the past three months, shares of this Vancouver, CA-based company have rallied 23.5%, outperforming the industry’s growth of 5.1%.
Further, analysts are steadily growing bullish on the Zacks Rank #2 (Buy) stock. The Zacks Consensus Estimate for fourth-quarter and fiscal 2019 earnings has moved north by 4.7% and 1.8% to $2.25 and $4.96, respectively, in the past 30 days.
Factors Narrating lululemon’s Growth Story
lululemon is on track with the Power of Three strategic plan. This five-year plan focuses on three core objectives — product innovation, augmenting omni-guest experiences and market expansion. Going forward, the company is optimistic about the innovation it plans to bring in its assortments for both men and women. Management plans to keep investing in strategies to maintain customer footfall, including efforts to augment store base and enhance shopping experience.
Apart from launching new assortments in the core men and women’s categories, its product innovation plan also focuses on testing new genres. The company has identified several new areas and it can test the same to offer innovative solutions to guests. A category wherein it is carrying out tests is the self-care, which includes products such as deodorants, moisturizers and shampoo. Additionally, it intends to tap into customers’ growing preference for athleisure by launching new product lines related to activities like yoga, running and training. Expansion of office luggage and travel bags, and continued partnerships are some of the other product-related initiatives.
Also, the company is keen on enhancing omni-channel guests’ experience. It is looking for new and exciting ways to connect with customers, as clear from the testing of its loyalty program. It has also expanded online only size and color offerings for both men and women, which is a testament to its efforts to attract digital guests. Moreover, it is gaining from the buy online pickup in-store capability in North America. The company has also improved mobile point-of-sale capabilities to help guests complete their purchases from anywhere in the store.
All said, we are optimistic that lululemon’s growth plans will help keep its stellar show on.
3 More Stocks to Consider
Zumiez Inc. ZUMZ has a long-term earnings growth rate of 12% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Boot Barn Holdings, Inc. BOOT delivered positive earnings surprise of 22.7%, on average, in the trailing four quarters. It has a long-term earnings growth rate of 17% and a Zacks Rank #2.
Foot Locker, Inc. FL has a long-term earnings growth rate of 8.9% and a Zacks Rank #2.
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