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lululemon (LULU) Ups Q4 View on Robust Holiday Performance

Zacks Equity Research

lululemon athletica inc. LULU witnessed a successful feat this holiday season as evident from its upbeat fourth-quarter fiscal 2018 guidance. The holiday season this year marked the strongest seasonal sales in six years, with stellar online sales. Per the Mastercard SpendingPulse, retail sales, excluding automobiles, (from Nov 1 through Dec 24) increased 5.1% compared with 4.9% growth witnessed last year.

Also, lululemon’s business remained sturdy through this holiday season, thanks to solid momentum in its product offerings and strategic initiatives. For the fourth quarter of fiscal 2018, which constitutes the vital holiday shopping season, lululemon projects net revenues in the band of $1.140-$1.150 billion, up from the $1.115-$1.125 billion guided range (issued on Dec 6, 2018). On a constant-dollar basis, management expects total comparable sales (comps) to grow in mid-to-high teens. Earlier, it anticipated comps to increase in the high-single to low-double digits.

As a result, earnings per share for the impending quarter are envisioned to be $1.72-$1.74 on effective tax rate of 30%. This earnings guidance reflects an increase from the $1.64 to $1.67 range, guided previously. The Zacks Consensus Estimate for quarterly earnings is pegged at $1.70 per share.

Notably, the guidance excludes some discrete tax expenses associated with the U.S. tax reforms along with repatriation that is estimated to be realized in the fiscal fourth quarter. It also excludes the anticipated tax gains from the recent changes in legislation and outlook with respect to the global intangible low-taxed income taxes. Furthermore, management still assumes shares outstanding of about 133 million.

This leading athleisure apparel maker remains optimistic about ending fiscal 2018 on a solid note, thanks to the company’s progress on its strategy for 2020 as well as solid focus on digital and international growth. The company is strongly focused on enhancing the e-commerce retailing channel and investing in the innovation of new product categories, and bringing improvements to its website. Notably, e-commerce contributed $189 million or 25% to total sales in the last reported quarter.

Management projects fiscal 2018 revenues of $3.235-$3.245 billion with comps growth of mid-teens on a constant-dollar basis. Earnings for the fiscal year are projected to be $3.65-$3.68 per share.
 
Some of the gainers to join lululemon in the list are American Eagle Outfitters, Inc. AEO, Ollie's Bargain Outlet Holdings, Inc. OLLI and Urban Outfitters, Inc. URBN, which reported comps growth of 6%, 7.1% and 5%, respectively, during the holiday season.



Coming back to the Vancouver, Canada-based company, shares of lululemon have advanced 17.6% compared with the industry’s 4.7% growth in the past month.

Presently, lululemon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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