$Lululemon Athletica (LULU.US)$ Lululemon Athletica (LULU.US...

股勇者 commented on a stock · Jun 6 20:42

$Lululemon Athletica(LULU.US)$ Lululemon Athletica (LULU.US)
323.030
321.720
+4.79%
-0.41%

Lululemon Athletica (LULU.US)
323.030
321.720
+4.79%
-0.41%

Has Lululemon Athletica Turned a Corner? Perhaps Not, Wall Street Says
Barron's
·
07:52
·
Earnings
5mins
Lululemon Athletica (LULU.US)
323.030
321.720
+4.79%
-0.41%

By Sabrina Escobar

Is one good quarter enough to wipe out months of anxiety about a company's long-term growth trajectory?

That's the question investors are grappling with in the wake of a stronger-than-expected earnings report from $Lululemon Athletica (LULU.US)$, which saw the company increase revenue by 10% year-over-year and raise its full-year earnings guidance.

The stock's reaction suggested it was. Lululemon shares jumped 10% in after-hours trading Wednesday, and closed nearly 5% higher Thursday, marking their largest one-day percent increase since October 2023. The shares are still down 37% this year.

Heading into the report, there was rising uneasiness that macroeconomic challenges, a shift in fashion trends, and rising competition from relative newcomers Alo Yoga and Vuori would weigh on demand in the U.S., Lululemon's biggest market.

But many on Wall Street say it's too early to determine whether Lululemon has turned a corner. The mean price target for the shares fell to $415.90 Thursday from $460.23 at the end of April, according to FactSet. Earnings estimates for the quarter ending this July also moved lower.

"We don't think LULU's results were enough to debunk the bear thesis, which likely remains outstanding, and potentially continues to cap LULU's multiple near-term," wrote Morgan Stanley analyst Alex Straton. Straton rates the stock Overweight.

UBS analyst Michael Lasser, who has a Neutral rating on the stock, agrees. He says the stock will be "range-bound" until the market decides whether sales growth in the U.S. women's apparel business -- Lululemon's core market -- "is going to get better, or get worse." In fiscal 2023, Lululemon derived more than three-quarters of its total revenue from the Americas.

In the fiscal first quarter ended in April, Lululemon's Americas revenue increased 3% year-over-year. Companywide, women's apparel revenue grew by 10% during the period, a slowdown from 22% growth in the year-ago quarter. The company also saw softer sales in its accessories segment as the frenzy over its popular belt bag (fanny pack) starts to die down.

While the 3% revenue growth eased some concerns that its Americas sales trends weren't flatlining -- or worse, falling -- it's still a far cry from the 17% increase in sales the company saw just a year ago. And to bears, the slowdown suggest that there is still more pain to come.

"Competition is intensifying and will continue to do so, while the macroeconomic environment is deteriorating and the athletic industry is slowing down," wrote Randal Konik, an analyst at Jefferies. He rates the stock Underperform. "Coupled with 'The Law Of Large Numbers,' it will be difficult for the company to maintain high sales, margins, and EPS [earnings per share] levels."

Lululemon's executive team tried to assuage those concerns Wednesday. CEO Calvin McDonald said the company wasn't seeing any dramatic shifts in competition from the quarter, but rather attributed the sluggish growth to management missteps that led to "missed opportunities."

Those include lacking the right color and sizing assortment, as well as slower innovation cycles -- problems McDonald pledged to rectify in coming months. The second half of the year will have several product launches testing new fabrics and styles, the company said.

Bulls are upbeat about Lululemon's revamp efforts. The new fabric launches alone could differentiate the brand from its competitors, noted Goldman Sachs analyst Brooke Roach, who reiterated a Buy rating on the shares Thursday.

The report contained several other data points that warrant optimism, Roach added -- chiefly that the company continues to grow outside its core areas. The men's apparel business, for instance, is gaining market share, management said. International sales grew 35% year over year, including a 45% increase in mainland China.

"We continue to see opportunity for sequential improvement in North America trends into 2H [the second half of the year] on the back of strengthening innovation," Roach wrote. "Longer term we believe LULU's positioning is robust."

Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more

Translate

Report

24K Views

Comment

股勇者

Investing in valued stocks for long term, and turbocharge with short term trading ie options

342Followers

114Following

1651Visitors