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Lululemon athletica (LULU) |
HenryTo
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 Posted: Fri Sep 10, 2010 10:29 am Post subject: Lululemon athletica (LULU) |
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Lululemon still going strong. Following is Morningstar's take on its 2Q earnings:
| Quote: | | Lululemon athletica's LULU impressive second-quarter results affirm our thesis that the firm's strong brand image, quality merchandise, and grassroots marketing strategy will attract a loyal customer base despite an uncertain economy. Additionally, strong performance at newer stores exceeded our expectations as the brand gains significant traction in the United States. We are placing lululemon under review and plan to increase our fair value estimate as we incorporate these changes into our valuation. Total quarterly revenue was up 56% to $152 million, driven primarily by incremental sales from new stores and a 31% increase in comparable-store sales on a constant currency basis. The sales improvement was driven by both increased traffic and higher prices, which is an admirable feat, in our view, as most retailers are finding it increasingly difficult to maintain prices in this promotional environment. In our view, solid sales momentum should continue through the rest of 2010, given lululemon's differentiated products and knack for connecting with consumers. However, we estimate that the pace of growth will moderate beginning in the third quarter, as the firm starts to lap tough year-over-year comparisons. As a result, we estimate lululemon will deliver comparable sales growth in the low 20s for the full year (up from the midteens range previously forecast), despite the 33% increase year to date. Given a stronger top line, more full-price selling, and gains from a stronger Canadian dollar, the quarterly operating margin expanded to 23.9% from 14.7% in the prior year. Although we believe the firm will continue to benefit from better merchandise margins, operating leverage, and the positive impact of foreign currency translations over the next few quarters, higher preopening expenses and e-commerce costs will probably offset some of these benefits in the back half of the year. Therefore, we project the operating margin will expand to 23.0% in 2010 from 19.2% in 2009. |
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Lululemon athletica (LULU) Replies |
HenryTo
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Location: Los Angeles, California
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| Posted: Thu Mar 22, 2012 2:03 pm Post subject: |
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Morningstar on LULU's 4Q earnings.
| Quote: | | Lululemon's LULU growth opportunities remain promising. The company ended the year with 174 locations primarily in the United States and Canada, and we think overseas location growth could be the next best opportunity. New product lines (men's, youth) are helping profitability grow at a rapid clip, but location growth will be key to maintaining this frenzied pace longer t erm. We like the lululemon story but not the stock, as it remains overvalued based on our $50 fair value estimate, which at most will increase slightly once we tweak our near-term estimates. With a price/earnings ratio of about 45 times with expected earnings growth of 22%, we think there is a better entry point for investors. The company reported another stellar quarter of 26% comp-store sales growth in the fourth quarter, down slightly from the 28% comp in the fourth quarter last year. Total sales hit the billion-dollar mark for fiscal 2011, with fourth-quarter sales up 51% to $371.5 million. The gross margin fell 220 basis points in the quarter, which is a much less precipitous drop than other retailers have experienced; we believe this is a reflection of lululemon's premium pricing strategy that doesn't allow for very much in the way of discounting. Earnings per share were ahead of our estimate ($0.47), the Street consensus ($0.49), and management's guidance in January ( $0.47-$0.49), arriving at $0.51 for the fourth quarter. Management provided a 2012 outlook that included first-quarter revenue of $265 million-$270 million with comparable-store sales in the low 20s and earnings per share of $0.28-$0.29, implying roughly 44% growth on the top line and 26% growth on the bottom line. For the full year, earnings per share guidance of $1.50-$1.57 is slightly under our and the Street's full-year estimates, which is probably what was weighing on the stock in premarket trading. Overall, lululemon remains an attractive growth story, but only at the right price. We believe the company has numerous opportunities ahead, and we have seen the success the business has garnered expanding into men's and youth and integrating capsules (bike) into its stores. Given the potential reach of the business, revenue and earnings should be able to expand quickly. However, we cannot justify recommending the stock, as this growth potential is more than priced into the shares. |
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HenryTo
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Location: Los Angeles, California
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| Posted: Wed Jan 11, 2012 1:49 am Post subject: |
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Morningstar on LULU's upcoming 4Q earnings.
| Quote: | | In advance of lululemon's LULU presentation at the annual ICR Xchange conference on Wednesday, the company announced that it is raising its fourth-quarter sales and earnings forecasts, proving it will easily reach management's goal of both top- and bottom-line growth of 25% yet again. We expect to review our fair value estimate of $44 as we take into consideration the strong growth opportunities the company has available, particularly with regard to its newer offerings in both men's and youth active wear. For now, we believe the stock remains overvalued, trading in the premarket at almost $60, reflecting a 2012 price to earnings multiple of 37 times. Lululemon indicated that sales are likely to come in more than 9% higher than the original forecast, and the company has raised its revenue projection from $327 million-$332 million to $358 million-$363 million. This was supported by same-store sales that were in the low- to mid-20s% range rather than the original low to midteen range. These two factors together helped lululemon raise its earnings per share guidance from a midpoint of $0.41 to a midpoint of $0.48, which reflects a year-over-year increase of 26%. With success in a holiday quarter where so many other specialty retailers struggled, we believe lululemon has proved that its merchandising prowess will help the company prevail well into 2012. |
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HenryTo
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Posts: 11740
Location: Los Angeles, California
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| Posted: Sat Jun 11, 2011 12:01 am Post subject: |
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Morningstar on LULU's fiscal 1Q results:
| Quote: | | We are placing lululemon athletica LULU under review as the firm posted stellar first-quarter results and significantly raised its full-year outlook. The yogawear retailer exceeded even our optimistic expectations, validating our thesis that the firm's strong brand image and quality merchandise, coupled with positive trends in the athletic apparel categories, will boost near-term results. Management now expects earnings of $2.10-$2.16 per share compared with the previous forecast of $1.90-$2.00 per share (a 23%-26% increase from 2010). The firm also raised its top-line growth forecast to 29%-31% from the 26%-30% previously expected. Total quarterly revenue was up 35% to $187 million, driven by new store openings and a 16% increase in comparable-store sales on a constant currency basis. Thanks to a stronger top line, more full-price selling, and gains from a stronger Canadian dollar, the quarterly operating margin expanded 280 basis points to 26.3%, excluding nonrecurring items. In our view, solid sales and earnings momentum should continue through 2011, given lululemon's differentiated products and knack for connecting with consumers. However, competition in women's athletic apparel is heating up, with national clothing retailers like Gap GPS and Limited Brands' LTD Victoria's Secret as well as global athletic apparel brands like Nike NKE and adidas vying for a bigger piece of that market. With minimal customer switching costs and low barriers to entry in the apparel market, we think it will be tough for lululemon to consistently generate excess returns in the long run. |
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HenryTo
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Posts: 11740
Location: Los Angeles, California
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| Posted: Thu Mar 17, 2011 6:45 pm Post subject: |
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Finally time to short LULU? Morningstar on LULU's 4Q results:
| Quote: | | After reviewing lululemon athletica's LULU fourth-quarter results, we are maintaining our fair value estimate at $32 per share. In line with our expectations, the yogawear retailer reported solid results, which validates our thesis that the firm's strong brand image and quality merchandise, coupled with positive trends in the athletic apparel categories, will boost near-term results. Management provided an optimistic 2011 earnings forecast of $1.90-$2.00 per share (10%-15% increase from 2010), including a 26%-30% top-line growth estimate. This implies a modest margin contraction, which is not surprising, given higher input costs on the horizon and the firm's reinvestment in expanding its store base in the near term. Despite impressive results and upbeat projections, the stock dropped in premarket trading, affirming our view it has been trading on the assumption that current levels of peak productivity and margin expansion will rise over an extended period and any sign of deceleration or even just the lack of positive surprise in results will place downward pressure on the shares. Trading at forward fiscal-year price/earnings of 40 times and enterprise value/EBITDA of 21 times, the stock is overvalued, in our opinion. Total quarterly revenue was up 53% to $245 million, driven by new store openings and a 28% increase in comparable-store sales on a constant currency basis. The e-commerce channel grew substantially (up 152%) and now accounts for 10% of total sales, up from 6% in the prior-year quarter. Given a stronger top line, more full-price selling, and gains from a stronger Canadian dollar, the quarterly operating margin expanded 340 basis points to 29.8%. In our view, solid sales and earnings momentum should continue into 2011, given lululemon's differentiated products and knack for connecting with consumers. However, competition in women's athletic apparel is heating up, with national clothing retailers like Gap GPS and Victoria's Secret LTD as well as global athletic apparel brands like Nike NKE and Adidas vying to take a bigger piece of that market. With minimal customer switching costs and low barriers to entry in the apparel market, we think it will be tough for Lululemon to consistently generate excess returns in the long run. |
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HenryTo
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Posts: 11740
Location: Los Angeles, California
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| Posted: Thu Jan 13, 2011 1:43 am Post subject: |
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Morningstar on LULU's raised 4Q earnings guidance:
| Quote: | | After Tuesday's market close, lululemon athletica LULU raised its fourth-quarter earnings forecast by roughly 20%, to $0.55-$0.57 per share, following a better-than-expected holiday season. This is in line with our thesis that the retailer's strong brand image, quality merchandise, and grassroots marketing strategy will attract a loyal customer base in the near term. Additionally, strong performance at newer stores exceeded our expectations, as the brand is gaining significant traction in the United States. Lululemon now expects fourth-quarter revenue of $237 million-$239 million (50% year-over-year growth), driven by mid- to upper 20s comparable-store sales growth for the quarter. This brings implied full-year revenue to $703 million-$705 million (55% growth year over year), modestly above our prior full-year outlook of $680 million and management's previous implied guidance of $676 million-$681 million. Given solid top-line growth and better full-price selling, we project that the firm will deliver a record quarterly operating margin in the high 20s. We plan to increase our earnings forecast for fiscal 2010 to the higher end of management's estimate, but this will not be material enough to alter our fair value estimate. While we think lululemon will continue to post strong results in the near term (30% revenue growth and 25% operating margin in fiscal 2011), competition in women's athletic apparel is heating up, with national clothing retailers like Gap GPS and Victoria's Secret LTD as well as global athletic apparel brands like Nike NKE and adidas vying to take a bigger piece of that market. With minimal customer switching costs and low barriers to entry in the apparel market, we expect it to be tough for Lululemon to consistently generate excess returns in the long run. Therefore, trading at a forward fiscal-year price/earnings of 39 times and an enterprise value/EBITDA of 19 times, the stock is overvalued, in our opinion. |
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HenryTo
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Posts: 11740
Location: Los Angeles, California
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| Posted: Thu Dec 09, 2010 12:24 pm Post subject: |
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LULU up 18% today and hits a new all-time high. Morningstar on LULU's 3Q results:
| Quote: | | Lululemon athletica LULU posted third-quarter results that exceeded our expectations, affirming our thesis that pent-up demand in the women's apparel business and positive trends in the athletic apparel categories will boost near-term results. The sales improvement was driven by increased traffic and higher prices, which is an admirable feat, in our view, as most retailers are finding it increasingly difficult to maintain prices in this promotional environment. Given a stronger top line, more full-price selling, and gains from a stronger Canadian dollar, the quarterly operating margin expanded by 560 basis points to 24.2%. In our view, solid sales and earnings momentum should continue into 2011, given lululemon's differentiated products and knack for connecting wi th consumers. Therefore, we plan to modestly increase our fair value estimate. While we think lululemon will continue to post strong results in the near term, competition in women's athletic apparel is heating up, with national clothing retailers like Gap GPS and Victoria's Secret LTD as well as global athletic apparel brands like Nike NKE and Adidas vying to take a bigger piece of that market. And with minimal customer switching costs and low barriers to entry in the apparel market, we think it is tough for Lululemon to consistently generate excess returns in the long run. Therefore, trading at forward fiscal-year price/earnings of 46 times and enterprise value/EBITDA of 22 times, the stock is overvalued, in our opinion. |
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