Lululemon, Inc. (LULU: 38.92 +0.03 +0.08%) recently hit a new all-time high at $46.49 after reporting another awesome quarter in early June that included a 29% earnings surprise. Estimates have since been on the rise for this Zacks #2 rank stock that operates in a Zacks Industry rank #28 out of 264.Lululemon has been a hot company and stock coming out of the recession as higher-end consumers regain the confidence to spend on premium yoga and athletic apparel. That dynamic was on display in early June when the company reported better than expected Q1 results.
First-Quarter Results
Net revenue for the period was up 69% from last year to $138 million. Earnings also came in strong at 27 cents, 29% ahead of the Zacks Consensus Estimate, raising the company’s average earnings surprise over the last four quarters to 25%.
Although Lululemon opened four new stores during the quarter, putting it on pace to open 12 to 15 stores for the year, its comparable-store sales also looked great with a 35% annual gain.
The company’s impressive sales growth was accompanied by effective expense and cost management, with gross margin increasing 11% from last year to 54%. Its SG&A costs also improved, down 40 basis points to 30.3%. Those two factors helped the company show a big gain in operating margin, jumping to 23.5% from 12% last year.
A Look Forward
Moving forward, Lulelemon should be in good shape to continue growing. It has a solid balance sheet that provides it with the ability to pursue expansion, particularly at the international level where it still has limited exposure. The company also continues to develop its online stores, where sales growth has already been exceptional. Brand recognition should also work in its favor, with 90% of its US stores open less than 4 years old making it a very young brand.
Estimates
The analysts are optimistic on the company’s outlook too, with the current year up 8 cents to $1.16 and the next year adding 5 cents to $1.43, a bullish 24% growth projection.
ValuationAlthough LULU’s forward P/E of 33X looks a bit pricey on first glance, it is in line with its peer’s average of 32X.
| Analysts' Targets | |
| Robert W. Baird & Co. | $49 |
| Market Perform | |
| Wednesday, June 23, 2010 | |
| Rodman & Renshaw Inc. | $38 |
| Hold | |
| Friday, May 14, 2010 | |
| Credit Suisse | $46 |
| Neutral | |
| Friday, March 26, 2010 | |
| JMP Securities LLC | $42 |
| Mkt Outperform | |
| Thursday, March 25, 2010 | |
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