5 Lululemon Analysts Break Down Q1 Beat: 'Momentum Building At LULU'

Lululemon Athletica Inc LULU shares traded higher by 3.2% on Friday after the company reported an aggressive rebound in sales and store traffic in the first quarter.

Lululemon reported first-quarter adjusted EPS of $1.16 on revenue of $1.23 billion. Both numbers topped consensus analyst estimates of 91 cents and $1.13 billion, respectively. Revenue was up 88% from a year ago.

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Lululemon’s sales were up 57% compared to the same quarter in 2019, before last year’s COVID-19 pandemic.

Direct-to-consumer sales were up 55% to $545.1 million. North American sales were up 82%, while international sales jumped 125%.

Looking ahead, Lululemon guided for full-year adjusted EPS of between $6.73 and $6.86 and revenue of between $5.83 and $5.91.

Industry-Leading Momentum: Oppenheimer analyst Brian Nagel said Lululemon reported another quarter of “momentum building.”

“Overall, we look very favorably upon recent trends at LULU and view indications of improving, underlying top- and bottom-line momentum at the company as consistent with our opinion of Lululemon as particularly well-positioned to capitalize upon easing coronavirus pressures and related economic recovery,” Nagel wrote.

RBC Capital Markets analyst Beth Reed said Lululemon continues to ride the wave of secular tailwinds and is well-positioned for growth in 2021.

“We think the company’s multiple growth drivers (ecomm, international, men’s, innovation) will continue to drive strength in the core business, with potential upside in 2022 as MIRROR’s investment cycle wanes,” Reed wrote.

Telsey Advisory Group analyst Dana Telsey said Lululemon once again demonstrated its strong operating momentum.

“LULU continues to successfully invest in long-term growth drivers (such as international and digital at the Lululemon brand) from a position of strength, while core business trends continue to perform well near-term,” Telsey wrote.

Valuation Concerns: BMO Capital Markets analyst Simeon Siegel said Lululemon is leading the industry in growth, but there may be limited upside at the stock’s current valuation.

“Interestingly, despite a materially higher ecomm penetration vs 1Q19, EBIT margins fell just shy, validating our concerns that ecomm is mix shift dilutive, not accretive,” Siegel wrote.

Wells Fargo analyst Ike Boruchow said Lululemon’s brand momentum continues, but the key debate over the stock is its valuation.

“While the company has many attractive growth prospects (which have higher visibility than in the past) that they appear to be executing on, we believe this [is] fairly reflected in [its] valuation,” Boruchow wrote.

Ratings And Price Targets:

• Oppenheimer has an Outperform rating and a $405 target.
• BMO has a Market Perform rating and a $275 target.
• RBC has an Outperform rating and a $380 target.
• Wells Fargo has an Equal Weight rating and a $335 target.
• Telsey has an Outperform rating and a $440 target.

(Photo: Lululemon)