When Lululemon Athletica Inc LULU releases quarterly financial results after market close Thursday, analysts expect second-quarter revenue of $2.41 billion, or $2.94 per share, according to data from Benzinga Pro.
The company reported revenue of $2.21 billion, or $2.68 per share, for the second quarter of 2023.
The apparel company has beaten analyst estimates for revenue for nine straight quarters, and earnings per share estimates for more than 10 straight quarters.
Guidance from the company calls for second-quarter revenue to be in the range of $2.4 billion to $2.42 billion and earnings per share to be in a range of $2.92 to $2.97.
Read Also: Lululemon Q2 Earnings On Deck: Charts Indicate Bullish Outlook But Some Signals Suggest Caution
What Analysts Say: Lululemon shares could be oversold ahead of second-quarter results, Truist analyst Joseph Civello said in a new investor note.
Civello reiterated a Buy rating and $310 price target.
"While sluggish US sales and recent execution issues are concerning, we think shares look oversold at current levels," Civello said.
The analyst said Lululemon shares are down 47% year-to-date versus 18% gains for the S&P 500. Lululemon's price-to-earnings ratio of 18 to 19 is also at historical lows, the analyst added.
"In our view, LULU's brand remains strong (with substantial international momentum/growth opps) and if they can fix execution issues, we believe US trends can meaningfully improve in 2025 against far easier comparisons."
Civello cited concerns about competition — San Diego-based Vuori and Los Angeles-based Alo Yoga — showing growth. The analyst said the growth for the private brands is coming from new stores and could moderate quickly.
Civello also reminded investors that Lululemon saw pressure from other brands that didn't materialize with Yogasmoga, Lucy, PrAna and Sweaty Betty.
"Through its history the company has proven its ability to perform well despite macro volatility, changing fashion trends, and competition."
Execution challenges and a lack of innovation in products led Goldman Sachs analyst Brooke Roach to downgrade shares in August. The analyst downgraded shares from Buy to Neutral and lowered the price target from $463 to $286.
Roach sees a balanced risk-reward for the stock due to the execution challenges and increased promotional activity. The analyst also said store traffic has declined in each month of 2024.
Lululemon website traffic has also underperformed the competition, Roach said.
Multiple analysts have lowered their price targets in the month of August ahead of the earnings report.
Key Items to Watch: One of the key items investors and analysts will be watching is the company's international growth.
Lululemon’s international revenue is up 35% year-over-year for the first quarter. The Americas segment is up 3% year-over-year.
"In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world," Lululemon CEO Calvin McDonald said after first-quarter results.
Based on the analyst commentary, investors would welcome an update on product innovation and new stores.
"Guests responded well to our product innovations across categories," McDonald said previously.
Consumer spending and same-store sales could also be key items to watch. Some consumers are making the switch to value retailers and products. With more competition for Lululemon, the second-quarter results could show if consumers traded down for less expensive activewear.
LULU Price Action: Lululemon shares are down 5% to $258.56 on Wednesday versus a 52-week trading range of $226.01 to $516.39. Lululemon stock is down 48% year-to-date in 2024 as of Wednesday.
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