From Bras To Bottoms, Lululemon's Got A Powerful Brand

Lululemon Athletica inc LULU bolstered the confidence of some analysts after a first-quarter beat and a fiscal 2017 guidance boost.

Oppenheimer analyst Anna Andreeva was never bearish, however, and reiterated an Outperform rating with a price target of $65.

“Even when [lululemon] has a product misstep, over and over again, powerful brand equity brings the consumer back quickly,” said Andreeva said in a note Friday.

She pointed out April’s acceleration was driven in part by a better color balance in the company's product mix, a point of concern for Deutsche Bank’s Paul Trussell.

Momentum On 2 Fronts

Andreeva noted that new leadership under senior vice president of merchandising Sun Choe is helping to provide better topline stability and speed up supply chain work.

Lululemon is also planning to close most of its ivivva brand stores, shifting to an e-commerce focus. Andreeva estimates that this pivot could benefit EPS by $0.02 or more.

Specifically, the analyst is mainly focused on sales of the recently launched Enlite bra, priced at $98.

The bra hasn’t seen any price resistance, and momentum could drive the bra category alone to hit the company's total comps guidance of one to two percent.

The bra category reaching the size of women’s bottoms could mean over $250 million in incremental sales.

“[Lululemon] could be one of the few retailers with both top-line and bottom-line momentum,” said Andreeva.

At time of publication, shares of lululemon were up 12.53 percent at $54.77.

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