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lululemon (LULU) on Track With Growth Strategies: Stock to Gain
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lululemon athletica inc. (LULU - Free Report) is benefiting from continued business momentum and innovative products. The company’s top and bottom lines have been witnessing positive trends on robust traffic in stores and e-commerce. LULU has been capitalizing on the importance of physical retail and the convenience of online engagement, which are expected to boost its performance. It is on track with the Power of Three X2 growth plan.
The company reported notable increase in net revenues and earnings per share during the holiday season, underlining its resilience and ability to adapt to evolving consumer preferences. LULU witnessed balanced sales trends across channels, categories and geographies during the holiday selling period, which enabled it to raise its view for the fiscal fourth quarter. Sales mainly gained from its focus on fresher styles. Management noted that guests continued to respond positively to lululemon's innovative and versatile product offerings.
Gains from these positive trends have been well-reflected in its share price. Shares of this Zacks Rank #2 (Buy) company have rallied 53.1% in the past year, outpacing the industry’s growth of 6.2%. The stock also fared better than the Consumer Discretionary sector and S&P 500’s growth of 2.1% and 21.3%, respectively, in the same period.
Image Source: Zacks Investment Research
Factors Driving Growth
lululemon continues to benefit from progress on its Power of Three X2 growth strategy. As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion. The plan focuses on three key growth drivers, including product innovation, guest experience and market expansion.
The five-year plan is likely to quadruple international sales, along with doubling digital and menswear sales. Also, each of the women’s business and North America operations are anticipated to witness a low-double-digit CAGR in revenues, with store channel growth in mid-teens in the next five years. As part of its strategy, the company intends to expand in China as well as markets in Europe, with plans to open stores in Spain and Italy.
For 2021-2026, total net revenue CAGR is expected to be 15%, with a slight expansion in the operating margin on an annual basis. lululemon anticipates bottom-line growth to outpace revenue growth. Although the 2026 targets seem too bold, it believes that these are achievable due to its strong financial position.
LULU expects to capture the growing online demand and ensure robust shopping experience through its accelerated e-commerce investments. It has been investing in developing sites, building transactional omni functionality and increasing fulfillment capabilities. The company continues to strengthen omni-channel capabilities such as curbside pickups, same day deliveries and BOPUS (buy online pick up in store). It is enhancing its mobile app in a bid to offer the curbside pickup facility and train its store associates to help customers speed up transactions.
In third-quarter fiscal 2023, direct-to-consumer net revenues rose 18% (up 19% on a constant-dollar basis). In the digital channel, revenues accounted for 41% of net revenues. E-commerce traffic also improved 20% in the fiscal third quarter.
For fourth-quarter fiscal 2023, the company anticipates net revenues in the range of $3.170-$3.190 billion, indicating a 14-15% increase from a year ago. It earlier predicted net revenues in the $3.135-$3.170 billion band. The raised revenue guidance reflects the brand's strong market performance.
Earnings per share are expected to be between $4.96 and $5.00 for the fiscal fourth quarter, showcasing an upward revision from $4.85-$4.93 stated earlier. The revised view reflects strong sales as well as the brand's effective cost management and operational efficiency.
While there are upward revisions in net revenues, earnings per share and the gross margin, the company retained its previous guidance for SG&A expenses and the effective tax rate. It estimated effective tax rate of 30% for the fiscal fourth quarter. This suggests that lululemon is maintaining a disciplined approach to cost management, ensuring a balance between top-line growth and operational efficiency.
Other Stocks to Consider
Some other top-ranked companies in the Consumer Discretionary sector are GIII Apparel Group (GIII - Free Report) , Skechers (SKX - Free Report) and PVH Corporation (PVH - Free Report) .
GIII Apparel, a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands, currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 541.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year earnings suggests growth of 39.3% from the prior-year reported level. The consensus mark for GIII’s earnings per share has been unchanged in the past 30 days.
Skechers, which designs, develops, markets and distributes footwear for men, women and children in the United States and overseas, currently carries a Zacks Rank #2. SKX has a trailing four-quarter earnings surprise of 50.3%, on average.
The Zacks Consensus Estimate for Skechers’ 2023 sales and earnings suggests growth of 8.2% and 45%, respectively, from the year-ago reported numbers. The consensus mark for SKX’s earnings per share has moved up 0.6% in the past seven days.
PVH Corp specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swim products, footwear, handbags and related products. It currently carries a Zacks Rank #2. PVH has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for PVH’s current financial-year sales and earnings suggests growth of 1.2% and 16.6%, respectively, from the year-ago period’s actuals. The consensus mark for PVH’s earnings per share has been unchanged in the past 30 days.
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lululemon (LULU) on Track With Growth Strategies: Stock to Gain
lululemon athletica inc. (LULU - Free Report) is benefiting from continued business momentum and innovative products. The company’s top and bottom lines have been witnessing positive trends on robust traffic in stores and e-commerce. LULU has been capitalizing on the importance of physical retail and the convenience of online engagement, which are expected to boost its performance. It is on track with the Power of Three X2 growth plan.
The company reported notable increase in net revenues and earnings per share during the holiday season, underlining its resilience and ability to adapt to evolving consumer preferences. LULU witnessed balanced sales trends across channels, categories and geographies during the holiday selling period, which enabled it to raise its view for the fiscal fourth quarter. Sales mainly gained from its focus on fresher styles. Management noted that guests continued to respond positively to lululemon's innovative and versatile product offerings.
Gains from these positive trends have been well-reflected in its share price. Shares of this Zacks Rank #2 (Buy) company have rallied 53.1% in the past year, outpacing the industry’s growth of 6.2%. The stock also fared better than the Consumer Discretionary sector and S&P 500’s growth of 2.1% and 21.3%, respectively, in the same period.
Image Source: Zacks Investment Research
Factors Driving Growth
lululemon continues to benefit from progress on its Power of Three X2 growth strategy. As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion. The plan focuses on three key growth drivers, including product innovation, guest experience and market expansion.
The five-year plan is likely to quadruple international sales, along with doubling digital and menswear sales. Also, each of the women’s business and North America operations are anticipated to witness a low-double-digit CAGR in revenues, with store channel growth in mid-teens in the next five years. As part of its strategy, the company intends to expand in China as well as markets in Europe, with plans to open stores in Spain and Italy.
For 2021-2026, total net revenue CAGR is expected to be 15%, with a slight expansion in the operating margin on an annual basis. lululemon anticipates bottom-line growth to outpace revenue growth. Although the 2026 targets seem too bold, it believes that these are achievable due to its strong financial position.
LULU expects to capture the growing online demand and ensure robust shopping experience through its accelerated e-commerce investments. It has been investing in developing sites, building transactional omni functionality and increasing fulfillment capabilities. The company continues to strengthen omni-channel capabilities such as curbside pickups, same day deliveries and BOPUS (buy online pick up in store). It is enhancing its mobile app in a bid to offer the curbside pickup facility and train its store associates to help customers speed up transactions.
In third-quarter fiscal 2023, direct-to-consumer net revenues rose 18% (up 19% on a constant-dollar basis). In the digital channel, revenues accounted for 41% of net revenues. E-commerce traffic also improved 20% in the fiscal third quarter.
For fourth-quarter fiscal 2023, the company anticipates net revenues in the range of $3.170-$3.190 billion, indicating a 14-15% increase from a year ago. It earlier predicted net revenues in the $3.135-$3.170 billion band. The raised revenue guidance reflects the brand's strong market performance.
Earnings per share are expected to be between $4.96 and $5.00 for the fiscal fourth quarter, showcasing an upward revision from $4.85-$4.93 stated earlier. The revised view reflects strong sales as well as the brand's effective cost management and operational efficiency.
While there are upward revisions in net revenues, earnings per share and the gross margin, the company retained its previous guidance for SG&A expenses and the effective tax rate. It estimated effective tax rate of 30% for the fiscal fourth quarter. This suggests that lululemon is maintaining a disciplined approach to cost management, ensuring a balance between top-line growth and operational efficiency.
Other Stocks to Consider
Some other top-ranked companies in the Consumer Discretionary sector are GIII Apparel Group (GIII - Free Report) , Skechers (SKX - Free Report) and PVH Corporation (PVH - Free Report) .
GIII Apparel, a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands, currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 541.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year earnings suggests growth of 39.3% from the prior-year reported level. The consensus mark for GIII’s earnings per share has been unchanged in the past 30 days.
Skechers, which designs, develops, markets and distributes footwear for men, women and children in the United States and overseas, currently carries a Zacks Rank #2. SKX has a trailing four-quarter earnings surprise of 50.3%, on average.
The Zacks Consensus Estimate for Skechers’ 2023 sales and earnings suggests growth of 8.2% and 45%, respectively, from the year-ago reported numbers. The consensus mark for SKX’s earnings per share has moved up 0.6% in the past seven days.
PVH Corp specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swim products, footwear, handbags and related products. It currently carries a Zacks Rank #2. PVH has a trailing four-quarter earnings surprise of 18.9%, on average.
The Zacks Consensus Estimate for PVH’s current financial-year sales and earnings suggests growth of 1.2% and 16.6%, respectively, from the year-ago period’s actuals. The consensus mark for PVH’s earnings per share has been unchanged in the past 30 days.