Lululemon Athletica’s Q4 Earnings to Grow Nearly 9%, Revenue About 19%

Lululemon Athletica, a healthy lifestyle-inspired athletic apparel company, is expected to report its fourth-quarter earnings of $2.48 per share, representing year-over-year growth of about 9% from $2.28 per share seen in the same quarter a year ago.

The Vancouver-based retailer would post year-over-year revenue growth of about 19% year-on-year to around $1.7 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 12%.

Lululemon shares, which surged more than 50% in 2020, slumped over 9% so far this year.

Analyst Comments

“While LULU pre-announced FQ4 in early January, we believe the company finished the quarter on a strong note with the potential for modest upside to the revised range. We are modeling FQ4 revenue growth of 17% and EPS growth of 11%. Based on our tracking, we expect FQ4 will be another quarter of robust DTC growth as we are modeling +45% digital revenue growth yet our web traffic data points to web traffic that was up +63% y/y, implying upside of 20%+ to our digital estimate. Importantly, digital strength appears to have continued into FQ1 as web traffic QTD through March 27 was up +41% y/y vs. our 1Q estimate of +15%, implying our estimate is too conservative,” noted Camilo Lyon, equity analyst at BTIG.

“With respect to stores, we are modeling a sequential improvement in stores with Q4 comps -10% although we expect COVID case spikes, cold snaps, and Canadian/European shutdowns likely created further pressure on store traffic that has likely lingered into Q1. Looking forward, we anticipate a strong recovery in-store performance in 2021 as LULU anniversaries COVID shutdowns in 1H21, vaccines rollout, and pent-up demand drives consumers back to stores. We reiterate our BUY rating and $453 price target.”

Lululemon Stock Price Forecast

Twelve analysts who offered stock ratings for Lululemon in the last three months forecast the average price in 12 months of $421.08 with a high forecast of $478.00 and a low forecast of $364.00.

The average price target represents a 33.19% increase from the last price of $316.16. Of those 12 analysts, 10 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $386 with a high of $493 under a bull scenario and $127 under the worst-case scenario. The firm gave an “Equal-weight” rating on the athletic apparel company’s stock.

“We see upside to both Street 4Qe EPS & mgmt. guidance, as revenue, GM, & SG&A assumptions appear conservative. The recent pullback may make for an attractive entry point, though we acknowledge valuation remains full at 46x ’21e P/E. Stay Equal-weight for now, & trim price target to $386 on rising rates/WACC.,” noted Joseph Moore, equity analyst at Morgan Stanley.

“Expanded eComm capabilities, improved supply chain, better inventory management, and product initiatives led to enviable ’18-’19 performance and a robust return to pre-COVID-19 levels in 3Q20, making +mid-high-teens comps seem normal. Still, the current valuation appears extreme, so we stay EW. Compelling LT and post-COVID-19 growth opportunity driven by three factors: international expansion (maybe less evident in ‘20e given COVID-19 outbreak), digital growth, and product innovation. LULU dominates the NA athletic yoga apparel category due to its unique brand positioning and fashionable products, and its athleisure focus is further advantaged in a COVID-19 affected world.”

Several other analysts have also updated their stock outlook. Deutsche Bank lowered the stock price forecast to $396 from $400. Piper Sandler cut the target price to $478 from $490. Raymond James boosted their price objective to $500 from $400 and gave the stock a “strong-buy” rating. Wells Fargo boosted their price objective to $330 from $275 and gave the stock an “equal weight” rating.

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