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lululemon (LULU) Rallies on Q4 Earnings Beat, Robust View
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lululemon athletica inc. (LULU - Free Report) delivered a solid fourth-quarter fiscal 2017 with both sales and earnings surpassing estimates and improving year over year. While this marked its fourth consecutive earnings beat, sales topped estimates for the ninth straight quarter.
The strong quarter was mainly driven by synergies from the re-launch of the company’s website, resulting in solid e-commerce growth. Additionally, results gained from improvements in product margins and cost efficiencies within its supply chain while scaling product innovation, expanding internationally and introducing new store formats.
Going into 2018, lululemon is likely to witness strong momentum across its business while executing successfully on its growth strategies. Driven by these, the company remains on track to deliver revenues of $4 billion for 2020.
Consequently, this Zacks Rank #3 (Hold) stock jumped 6% in the after-hours trading session on Mar 27, following the splendid results and outlook. Further, its shares surged 26.4% in the last six months, surpassing the industry’s 12.5% growth.
Q4 Numbers
lululemon posted adjusted earnings of $1.33 per share, beating the Zacks Consensus Estimate of $1.27 and rising 33% year over year. Including the effect of ivivva’s restructuring, earnings declined 11.1% year over year to 88 cents per share.
lululemon athletica inc. Price, Consensus and EPS Surprise
The Vancouver, Canada-based company’s quarterly revenues advanced about 18% to $928.8 million and stayed ahead of the Zacks Consensus Estimate of $910 million. On a constant dollar basis, revenues increased 16%. The improvement can be attributed to strong performance across all parts of the business. Further, foreign currency tailwinds bolstered revenues by $11 million in the quarter.
Total comparable store sales (comps), including in-store comps and direct-to-consumer sales, grew 12% while constant-dollar comps were up 11%. In-store comps were up 2% (up 1% in constant dollars basis) while DTC comps surged 44% (an increase of 42% in constant dollars).
Margins
Adjusted gross profit rose 22% to $522.4 million in fourth-quarter fiscal 2017. Moreover, adjusted gross margin expanded 200 basis points (bps) to 56.2%, exceeding the management’s expectations. The gross margin was fueled by 130 bps improvement in product margins, backed by favorable product mix, reduced product costs and lower markdowns.
Further, the quarter was marked by a 30 bps gain from foreign currency and 40 bps leverage in occupancy and depreciation costs. Further, the company witnessed cost efficiencies within its supply chain that helped lower freight costs.
Adjusted operating income increased nearly 31% to $258.1 million while the operating margin expanded 290 bps to 27.8%.
Store Updates
During the quarter under review, the company opened 16 new stores. As of Jan 28, 2018, it operated total 404 stores.
For fiscal 2018, the company targets opening 40-50 company-operated stores, including 20-30 stores in international locations. Of these, lululemon expects to open eight new stores in first-quarter fiscal 2018.
Financials
lululemon exited fiscal 2017 with cash and cash equivalents of $990.5 million and stockholders' equity of $1,597 million. Inventories were up 10.5% at $329.6 million.
As of Jan 28, 2018, lululemon generated $489.3 million as cash flow from operating activities. Further, it made $51 million capital expenditure in fourth-quarter fiscal 2017, mainly related to higher IT investments.
During fiscal 2017, the company bought back 1.9 million shares for an average cost of $53.85 per share. These repurchases were made under its previous $100 million program that ended in third-quarter fiscal 2017 and the $200 million program that was authorized in November 2017.
ivivva Strategy on Track
In June, Lululemon announced plans to develop ivivva, its activewear brand, into an e-commerce focused business with only eight ivivva stores operating across North America. It revealed plans to close about 40 of the total 55 ivivva stores and convert nearly half of the remaining stores into Lululemon branded stores.
In fourth-quarter fiscal 2017, lululemon recognized the final pre-tax charges of $1.9 million with regard to the ivivva restructuring plan. Total charges for the fiscal year summed to $47.2 million, which were in line with the company’s target of $45-$50 million. These charges are mainly associated with long-lived asset impairment and lease termination expenses.
Q1 Forecasts
For first-quarter fiscal 2018, lululemon anticipates revenues in the range of $612-$617 million with constant dollar comps expected to increase in the low-double-digits range. The company projects gross margin to improve 50-100 bps compared with the year-ago quarter, backed by ongoing supply chain initiatives. Management anticipates SG&A expense leverage of about 50-100 bps, driven by efficiencies in its cost structure.
lululemon envisions earnings for the first quarter to lie in a band of 44-46 cents per share. Effective tax rate is expected to be nearly 29%.
FY18 View
For fiscal 2018, lululemon projects revenues to range from $2.985-$3.22 billion, backed by mid-to-high single-digits comps growth on a constant dollar basis. Its sales and earnings for fiscal 2018 will include a modest benefit from the 53rd week.
The company expects modest gross margin expansion in fiscal 2018, driven by anticipated gains in product margins. During fiscal 2018, it expects improved deficiencies in the supply chain and better planning capabilities to result in lowering the use of air freight that will reduce per-unit freight costs, aiding product margins.
The company anticipates SG&A expense to leverage modestly, due to the absence of the digital acceleration cost incurred in 2017, as well as efficient cost management. Earnings for the fiscal year are projected in a band of $3-$3.08 per share. Effective tax rate is expected to decline from 31% to 29% in fiscal 2018, driven by gains from the new tax reform.
Capital expenditures for fiscal 2018 are estimated to be $240-$250 million, which mainly include the ramp-up of renovation and relocation programs, increased store opening in international markets and investments in general infrastructure projects.
Guess? gained 23.8% in the last three months. Moreover, it has long-term earnings growth rate of 17.5%.
Michael Kors has long-term EPS growth rate of 7%. Further, the stock returned 28.6% in the last six months.
PVH Corp. increased 13.9% in the last six months. Moreover, it has long-term earnings growth rate of 13.4%.
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lululemon (LULU) Rallies on Q4 Earnings Beat, Robust View
lululemon athletica inc. (LULU - Free Report) delivered a solid fourth-quarter fiscal 2017 with both sales and earnings surpassing estimates and improving year over year. While this marked its fourth consecutive earnings beat, sales topped estimates for the ninth straight quarter.
The strong quarter was mainly driven by synergies from the re-launch of the company’s website, resulting in solid e-commerce growth. Additionally, results gained from improvements in product margins and cost efficiencies within its supply chain while scaling product innovation, expanding internationally and introducing new store formats.
Going into 2018, lululemon is likely to witness strong momentum across its business while executing successfully on its growth strategies. Driven by these, the company remains on track to deliver revenues of $4 billion for 2020.
Consequently, this Zacks Rank #3 (Hold) stock jumped 6% in the after-hours trading session on Mar 27, following the splendid results and outlook. Further, its shares surged 26.4% in the last six months, surpassing the industry’s 12.5% growth.
Q4 Numbers
lululemon posted adjusted earnings of $1.33 per share, beating the Zacks Consensus Estimate of $1.27 and rising 33% year over year. Including the effect of ivivva’s restructuring, earnings declined 11.1% year over year to 88 cents per share.
lululemon athletica inc. Price, Consensus and EPS Surprise
lululemon athletica inc. Price, Consensus and EPS Surprise | lululemon athletica inc. Quote
The Vancouver, Canada-based company’s quarterly revenues advanced about 18% to $928.8 million and stayed ahead of the Zacks Consensus Estimate of $910 million. On a constant dollar basis, revenues increased 16%. The improvement can be attributed to strong performance across all parts of the business. Further, foreign currency tailwinds bolstered revenues by $11 million in the quarter.
Total comparable store sales (comps), including in-store comps and direct-to-consumer sales, grew 12% while constant-dollar comps were up 11%. In-store comps were up 2% (up 1% in constant dollars basis) while DTC comps surged 44% (an increase of 42% in constant dollars).
Margins
Adjusted gross profit rose 22% to $522.4 million in fourth-quarter fiscal 2017. Moreover, adjusted gross margin expanded 200 basis points (bps) to 56.2%, exceeding the management’s expectations. The gross margin was fueled by 130 bps improvement in product margins, backed by favorable product mix, reduced product costs and lower markdowns.
Further, the quarter was marked by a 30 bps gain from foreign currency and 40 bps leverage in occupancy and depreciation costs. Further, the company witnessed cost efficiencies within its supply chain that helped lower freight costs.
Adjusted operating income increased nearly 31% to $258.1 million while the operating margin expanded 290 bps to 27.8%.
Store Updates
During the quarter under review, the company opened 16 new stores. As of Jan 28, 2018, it operated total 404 stores.
For fiscal 2018, the company targets opening 40-50 company-operated stores, including 20-30 stores in international locations. Of these, lululemon expects to open eight new stores in first-quarter fiscal 2018.
Financials
lululemon exited fiscal 2017 with cash and cash equivalents of $990.5 million and stockholders' equity of $1,597 million. Inventories were up 10.5% at $329.6 million.
As of Jan 28, 2018, lululemon generated $489.3 million as cash flow from operating activities. Further, it made $51 million capital expenditure in fourth-quarter fiscal 2017, mainly related to higher IT investments.
During fiscal 2017, the company bought back 1.9 million shares for an average cost of $53.85 per share. These repurchases were made under its previous $100 million program that ended in third-quarter fiscal 2017 and the $200 million program that was authorized in November 2017.
ivivva Strategy on Track
In June, Lululemon announced plans to develop ivivva, its activewear brand, into an e-commerce focused business with only eight ivivva stores operating across North America. It revealed plans to close about 40 of the total 55 ivivva stores and convert nearly half of the remaining stores into Lululemon branded stores.
In fourth-quarter fiscal 2017, lululemon recognized the final pre-tax charges of $1.9 million with regard to the ivivva restructuring plan. Total charges for the fiscal year summed to $47.2 million, which were in line with the company’s target of $45-$50 million. These charges are mainly associated with long-lived asset impairment and lease termination expenses.
Q1 Forecasts
For first-quarter fiscal 2018, lululemon anticipates revenues in the range of $612-$617 million with constant dollar comps expected to increase in the low-double-digits range. The company projects gross margin to improve 50-100 bps compared with the year-ago quarter, backed by ongoing supply chain initiatives. Management anticipates SG&A expense leverage of about 50-100 bps, driven by efficiencies in its cost structure.
lululemon envisions earnings for the first quarter to lie in a band of 44-46 cents per share. Effective tax rate is expected to be nearly 29%.
FY18 View
For fiscal 2018, lululemon projects revenues to range from $2.985-$3.22 billion, backed by mid-to-high single-digits comps growth on a constant dollar basis. Its sales and earnings for fiscal 2018 will include a modest benefit from the 53rd week.
The company expects modest gross margin expansion in fiscal 2018, driven by anticipated gains in product margins. During fiscal 2018, it expects improved deficiencies in the supply chain and better planning capabilities to result in lowering the use of air freight that will reduce per-unit freight costs, aiding product margins.
The company anticipates SG&A expense to leverage modestly, due to the absence of the digital acceleration cost incurred in 2017, as well as efficient cost management. Earnings for the fiscal year are projected in a band of $3-$3.08 per share. Effective tax rate is expected to decline from 31% to 29% in fiscal 2018, driven by gains from the new tax reform.
Capital expenditures for fiscal 2018 are estimated to be $240-$250 million, which mainly include the ramp-up of renovation and relocation programs, increased store opening in international markets and investments in general infrastructure projects.
Looking for Some Trending Picks? Look at These
Some better-ranked stocks in the same industry are Guess? Inc. (GES - Free Report) , sporting a Zacks Rank #1 (Strong Buy), Michael Kors Holdings Limited and PVH Corp. (PVH - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Guess? gained 23.8% in the last three months. Moreover, it has long-term earnings growth rate of 17.5%.
Michael Kors has long-term EPS growth rate of 7%. Further, the stock returned 28.6% in the last six months.
PVH Corp. increased 13.9% in the last six months. Moreover, it has long-term earnings growth rate of 13.4%.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>