Lululemon Stock Soars To Record High With Earnings and Margins

Athletic apparel company Lululemon Athletica, best known for it’s yoga gear reported better than expected second quarter earnings sending the stock to all time highs. $LULU business is high margin, accelerating and expanding in new lines, online sales and in China.

Athletic apparel company Lululemon Athletica, best known for it’s yoga gear reported better than expected second quarter earnings sending the stock to all time highs. $LULU business is high margin, accelerating and expanding in new lines, online sales and in China.

Lululemon Pose

$LULU has successfully crafted out a niche for itself as a North American sports apparel brand in a very crowded marketplace, Nike remains the dominant player in the athletic apparel space with Adidas popular with teens and millennials.

Lululemon Athletica Inc NASDAQ: LULU · Beat Earnings After Close Thursday

 $0.71 Beat $0.49 EPS And $723.5 billion Beat $666.1 million forecast in revenue. 

Earnings 

LULU reported adjusted earnings of $0.71 per share, beating the $0.49 expected by analysts surveyed by Bloomberg. Lululemon  second quarter sales totaled $723.5 million, easily beating the $666.1 million estimate. Comparable sales were 19% on a constant dollar basis, well above the 9.5% growth that was anticipated.

Lululemon Athletica Inc NASDAQ: LULU 

Market Reaction – Pre Market $158.36 ▲ $21.23 (+15.48%)

This earnings report is the first for new CEO Calvin McDonald, who joined Lululemon from LVMH’s Sephora makeup business. McDonald replaced Laurent Potdevin, who resigned earlier this year after falling “short of [Lululemon’s] standards of conduct,” the company said at the time.

Highlights

  • Sales at Lululemon stores open for at least 12 months were up a huge 20 percent during the quarter. Analysts were forecasting same-store sales growth of 9.6 percent.
  • Direct to consumer net revenue increased 48%, or increased 47% on a constant dollar basis.
  • During the second quarter of fiscal 2017, we held an online warehouse sale. Excluding the impact of this sale, direct to consumer net revenue increased 66%, or increased 65% on a constant dollar basis.
  • Gross profit was $396.2 million, an increase of 33% compared to the second quarter of fiscal 2017. Gross profit increased 32% compared to adjusted gross profit for the second quarter of fiscal 2017.
  • Gross margin was 54.8%, an increase of 360 basis points compared to the second quarter of fiscal 2017. Gross margin increased 320 basis points compared to adjusted gross margin for the second quarter of fiscal 2017. Income from operations was $134.2 million, an increase of 95% compared to the second quarter of fiscal 2017.
  • Income from operations increased 81% compared to adjusted income from operations for the second quarter of fiscal 2017.
  • Operating margin was 18.5%, an increase of 670 basis points compared to the second quarter of fiscal 2017.
  • Operating margin increased 570 basis points compared to adjusted operating margin for the second quarter of fiscal 2017.
  • Income tax expense was $40.0 million compared to $20.8 million in the second quarter of fiscal 2017 and the effective tax rate was 29.5% compared to 29.9%.
  • The adjusted effective tax rate in the second quarter of fiscal 2017 was 29.6%. Diluted earnings per share were $0.71 compared to $0.36 in the second quarter of fiscal 2017.
  • Adjusted diluted earnings per share for the second quarter of fiscal 2017 were $0.39.
  • The Company repurchased 3.4 million shares of its own common stock at an average cost of $121.08 per share. 

Outlook

Looking ahead, the company now sees its full-year earnings to be in the range of $3.45 to $3.53 per diluted share, up from its previous calculation of $3.10 to $3.18. Analysts had expected $3.25.

On a call with analysts and investors Thursday afternoon, McDonald said Lululemon will continue to expand its men’s business and outerwear category, which includes more big-ticket items. The push into men’s is expected to be a big growth driver for Lululemon moving forward, according to industry analysts.

Source: Lululemon Athletica

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