Should You Still Hate Lululemon?

2015 was a very volatile year for many stocks and 2016 looks set to be worse. Few stocks including Lululemon (LULU) ended 2015 in the green and even a lesser number of them are up in 2016. Lululemon, however, appreciated modestly in 2015 and is already beating the market in 2016 as it is up about 9%.

The primary reason for Lululemon’s rise this year has been its improved guidance for the coming quarter. Lululemon now expects Q4 revenue in the range of $690 million-$695 million, indicating a year-over-year growth of approximately 15%.
That translates to diluted EPS of $0.78-$0.80.

In its latest reported quarter, Lululemon shared earnings per share of $0.38, $0.01 more than the analyst estimate of $0.37, whereas, revenue for the quarter came in at $479.7 million compared to analyst estimate of $481.78 million. The company’s comparable sales surged 9% on an annual basis.

The company has gone through many severe difficulties over the prior few years. For instance, its see-through-pants was a major incident that took place in 2013, and management made situation even inferior by giving a scanty reaction at the time. In spite of executing huge changes in the marketing tactic and management team, inventory and merchandise quality problems remained a concern for the company in 2015.

However, it looks like it is now finally delivering.  The situation appears to be improving as company reported a 14% revenue growth in the third quarter. Lululemon’s direct-to-customer sector escalated 21% on a currency basis and accounts for around 18% of Lululemon’s overall top line during the period.

Furthermore, the company’s management stated that its investments in supply chain are already conveying positive results, therefore Lululemon anticipates improving profit margins in the approaching quarters.

If Lululemon successfully improve its profit margin, it will be a great win for the company, as it will demonstrate shareholders that it is working hard to leave its problems behind.

In respect of financial performance, Lululemon is finding promising growth venues in diverse categories and business sectors. It appears like previous year played a vital in the Lululemon’s comeback. The company is finally moving away from its marketing problems, and now it is creating a perfect stage for growth in the forthcoming years. The company is just taking its initial step in the global market, and it presumes that this could be a gigantic opportunity in the future.


All the controversies aside, it finally looks like Lululemon has gotten rid of it demons. The company revised its guidance upwards which is a clear sign of progress. Lululemon has gotten a lot of hate in the past, but the stock finally looks like a good investment.
Published on Jan 22, 2016
By Akshansh Gandhi

Copyrighted 2020. Content published with author's permission.

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