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lululemon (LULU) to Report Q1 Earnings: Is a Beat in Store?

·5 min read

lululemon athletica inc. LULU is likely to witness top- and bottom-line growth when it reports first-quarter fiscal 2021 results on Jun 3, after market close. The Zacks Consensus Estimate for fiscal first-quarter sales is pegged at $1.12 billion, indicating a 71.3% increase from the prior-year quarter’s reported figure.

The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings is pegged at 90 cents, suggesting a substantial rise from 22 cents reported in the year-ago quarter. Earnings estimates have been unchanged in the past 30 days.

The company delivered an earnings surprise of 3.61% in the last reported quarter. Moreover, its bottom line beat estimates by 13.4%, on average, in the trailing four quarters.

lululemon athletica inc. Price and EPS Surprise

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 has been witnessing strong momentum in its e-commerce channel, which has been aiding its top and bottom-line performances for the past few quarters. The company’s e-commerce business is expected to have benefited from robust traffic and conversion rates in the to-be-reported quarter.

Additionally, a healthy mix of new guests, existing e-commerce guests and historically retail-only guests now shopping online are expected to have boosted e-commerce sales. Robust e-commerce growth is expected to have resulted in accelerated direct-to-consumer sales and top-line growth. Notably, direct-to-consumer revenues contributed 52% to total sales in the fourth quarter of fiscal 2020.

On the last reported quarter’s earnings call, management stated that it expects to capture the growing online demand and ensure a robust shopping experience through its accelerated e-commerce investments.

Moreover, the company has been strengthening omni-channel capabilities such as curbside pickups, same-day deliveries and BOPUS (buy online pick up in store). It has also been on track to enhance features such as search, browse, checkout, personalization and payment methods across online platforms. Gains from the efforts are expected to get reflected in the company’s sales for the fiscal first quarter.

Furthermore, the company’s store business has been picking momentum, with nearly 96% of global stores now open. It has been investing to enhance in-store experiences as well as leveraging its stores to facilitate omni-channel capabilities like the buy online pick up in store and ship-from-store. It has also introduced facilities like virtual waitlist, mobile POS and appointment shopping to improve the guest experience and reduce wait time. The enhancements are likely to have aided the company’s comparable store sales (or comps at company-operated stores) and comparable store productivity in the to-be-reported quarter.

On the last reported quarter’s earnings call, management predicted net sales of $1.10-$1.13 billion for first-quarter fiscal 2021. It expects gross margin to expand 50-100 bps year over year, with adjusted earnings of 86-90 cents per share.

However, deleverage in product margin, resulting from COVID-led higher airfreight costs and increased markdowns, is expected to have dented the company’s gross margin to some extent. Additionally, elevated SG&A expenses, stemming from higher marketing investment related to MIRROR, alongside impacts of store closures, capacity constraints and COVID-19 related costs are expected to have been deterrents.

On the last reported quarter’s earnings call, management stated that it expects to witness continued pressure from higher airfreight costs, owing to port congestion and capacity constraints. Further, it expects SG&A expense to deleverage on account of the continued occurrence of COVID-led expenses and investment in MIRROR among others.

What the Zacks Model Unveils

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 #4 and an Earnings ESP of +0.09%.

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.

Rocky Brands, Inc. RCKY has an Earnings ESP of +46.99% and it currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Boyd Gaming Corporation BYD has an Earnings ESP of +1.78% and it presently flaunts a Zacks Rank #1.

Crocs, Inc. CROX has an Earnings ESP of +0.17% and it currently sports a Zacks Rank #1.

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