Lululemon: Meeting Expectations with a Raise

January 10, 2024

Lululemon clothes stock

Lululemon Athletica, Inc. (NASDAQ: LULU), the popular athletic apparel brand, has recently shared positive news about its performance in the fourth quarter.

At the recent ICR Conference, the company raised its expectations for revenue, gross margin percentage (GM%), and earnings per share (EPS).

This update comes after LULU expressed cation about their North America business during their third-quarter results.

The new guidance falls in line with what the market expected, showing steady growth for LULU.

Key updates to LULU’s fourth-quarter guidance include the following:

  1. LULU raises EPS guidance by $0.09 at the midpoint, expecting to earn between $4.96 and $5.00 per share, compared to the previous estimates of $4.85 to $4.93. Analysts expect EPS of $4.97 per share.
  2. LULU predicts a year-over-year revenue growth of 14-15%, with a range of $3.170 billion to $3.190 billion. Analysts expect a 15% growth in revenue.
  3. LULU raises gross margin% by 20 basis points at the midpoint, expecting an increase by 120-130 basis points year-over-year, up from the previous range of 90-120 basis points. Analysts expect an increase of 110 basis points.
  4. LULU will maintain its spending growth rate for selling, general, and administrative expenses at 22% year-over-year.
  5. LULU’s operating margin % is expected to be higher by 20 basis points, ranging from 27.6% to 28.0%. Analysts expect an increase of 27.9%.

The stock market’s reaction to the news was not that significant, pointing towards expectations of a larger raise than what LULU had provided. It is essential to recognize however that LULU has consistently exceeded revenue estimates in the past. This update reaffirms Lululemon’s positive trajectory and makes it an attractive option for long-term investment.

In conclusion, LULU’s updated guidance for the fourth quarter meets market expectations, indicating steady growth for the company. With its strong performance and consistent track record, LULU continues to remain an attractive proposition for investors to consider investing in.

Disclaimer: ProsperUs Head of Content & Investment Lead Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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