LULU Earnings Sep 5th AH — Clear Beat or Potential Lemon?
Lululemon Athletica, Inc. is a Canadian-based athletic apparel retailer with an international footprint, both in-store and online. Their self-described image is as a yoga-inspired athletic apparel company for women and men. Key competitors include Athleta, Zella, Adidas, Alo Yoga, Fabletics, Nike, and Under Armour.
🍍 With that covered, let's first let's consider the numbers —
Consensus EPS Estimate is $0.89 (+80.16% YoY)
Consensus Revenue Estimate is $844.85M (+16.77% YoY)
Last four EPS have all been beats with an avg +15.68% surprise.
Last four Revenues have all been beats for an avg +3.65% surprise.
EPS revisions for the past 90 days include 12 upgrades and 8 downgrades.
Revenue revisions for the past 90 days include 21 upgrades and 3 downgrades.
Technicals are in near-agreement here, with a consensus Strong Buy.
This paints a rather rosy picture for the Lululemon franchise, and would normally clearly indicate a beat and subsequent rally following next earnings call, but there is more to consider here beneath the surface, especially considering the recently dismal performance of Ulta who one might argue caters to a similar demographic.
With Lulu's already strong foothold in the women's athletic apparel market, they have been putting more focus toward expanding their men's athletic apparel exposure in particular. We're however now seeing signs that this has not been a very lucrative strategy, as Lulu has been quietly shutting down men-focused storefronts in key locations such as Toronto and New York this year. All indications point to these storefronts presenting a rather out-of-touch shopping-experience for men, as they still give of an incredibly feminine vibe that is not seen with leading men's athletic apparel competitors such as Nike and Under Armour.
We've also been seeing a clear concern from Lulu regarding the accelerating competition of digitally based retailers, and their response has been to double-down on their storefronts with experimental integrations as opposed to investing more toward their digital presence. This is starkly evident with their recent opening of a mammoth 20,000 sq. ft. storefront in Chicago that boasts three exercise studios, a meditation room, and an in-store restaurant. That is a lot of confidence and capital to be putting into a diminishing retail market staple, especially since their younger audience in particular has been more-often opting for the ease and convenience of e-commerce.
Lastly we return to a topic on everyone's minds lately, China. Lulu has set their eyes upon Asian markets recently in their bid to expand international revenues, but such a bold move might indeed prove a headwind as China relations sour with the West and tariffs put a bigger dent in consumer wallets for product lines that are already highly-priced. This comes amid reports that luxury shopping overseas has been on an accelerating downtrend this year. Conversely, stores that cater to a more economically-minded consumer such as Costco have been booming.
See links for sources on some information
If you have not read our articles on $ULTA please read Before Earnings: ULTA Beauty Earnings Aug 29th AH — About To Get Ugly? After Earnings: ULTA Down −73.45 (21.77%) in AH. Epic Win! 🤑... update down $100 now
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