Lululemon (LULU) Stock Gains on Upwardly Revised Guidance, Strong Holiday Sales

Shares of Lululemon Athletica Inc. (LULU) were up +4.47 or +8.17 percent to $59.20 in Tuesday’s premarket after the company upwardly revised its guidance for the company’s fourth quarter, which runs until the end of January. Lululemon stock closed at $54.73 per share, up +0.82 or +1.52 percent in Monday’s regular trading session.

Vancouver, British Colombia based Lululemon Athletica Inc. was founded in 1998 by Chip Wilson.
The company describes itself as a yoga inspired athletic clothing and apparel company. The company produces a unique clothing line and distributes its products through an international retail chain of stores which operate in the United States, Canada, Australia and New Zealand. Chip Wilson stepped down from the company’s chief executive position in 2005 and resigned from the company’s board in February of 2015. Wilson resigned as the boards chairman in December of 2013 after the company had to recall 17 percent of the chain’s yoga pants because their sheerness made them turn out to be see-through.

For the company’s fourth quarter of its 2015 fiscal year ending on January 31st, 2016, Lululemon now anticipates its net revenue will be in a range of between $690 million to $695 million. The numbers show an increase of about fifteen percent versus the fourth quarter of fiscal 2014. On a constant currency basis, the year to year increase comes to approximately 19 percent.

The figures are based on total comparable store sales increasing in the high single digits on a constant currency basis. The company had previously forecast fourth quarter net revenue in a range between $670 million and $685 million based on total comp sales increasing in the mid single digits on a constant currency basis.

Diluted earnings per share are now expected to be $0.78 to $0.80 in the fourth quarter compared to a previous range of $0.75 to $0.78. The guidance for earnings per share assumes 139 million diluted weight average shares outstanding at a 29.5 percent tax rate.

Laurent Potdevin, Lululemon’s Chief Executive Officer, said in a statement that, “We had a very successful holiday season driven by strong execution in stores and online during the key holiday weeks. Sales for the fourth quarter are exceeding expectations and gross margin rates and expenses remain in line with prior guidance.”

On the analyst front, Lululemon stock was upgraded by Wells Fargo analyst Ike Bouchow on January 4th to a Buy rating with a price target of $65 per share. Also, on the same day Jeffries & Co. analyst Randal Konik upgraded the stock to a Buy with a price target of $70 per share.

The company’s stock is currently trading in the middle of its yearly range, having traded as high as $70 per share in early April of last year. With the revised guidance and promising results from the latest holiday shopping season, Lululemon stock could be a good investment in the retail apparel sector.

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Published on Jan 12, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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