Lululemon Continues To Be A Bright Spot In Specialty Retail

Lululemon Athletica inc. LULU is scheduled to pre-announce its fiscal fourth-quarter financial results next week and could provide sales and EPS guidance slightly higher than the current consensus expectations of $782 million and $1.00, respectively, BlueFin’s Rebecca Duval said in a report.

Channel checks indicate that the company “continues to be a bright spot in the specialty retail space” and would likely report strong holiday sales results, analyst Duval stated. She added that investors did not seem to appreciate the costs savings and margin expansion that would further benefit Lululemon’s financial results in FY 2017.

Bright Spot

Channel checks indicate that while several retailers are likely to report disappointing holiday sales results, Lululemon is likely to have witnessed solid holiday traffic, Duval mentioned. She further noted that year-over-year conversion and average unit retail are likely to have risen.

“Inventory seems to be tightly managed which should benefit AUR and margins. LULU is doing a great job flowing in newness in all categories which we think is contributing to improved conversion activity,” the analyst wrote.

Lululemon has undertaken “major overhauls and implementations” over the past 1.5 years. These would continue to benefits in terms of IMUs, providing the company with improved AUR/margin opportunity as well as allowing a cushion to be added for mark-downs “without hurting the margin/earnings story,” Duval noted.