Lululemon Athletica
stock has sprinted ahead of its competitors, and some analysts say the company’s second-quarter earnings could give the shares a second wind.
The athletic wear retailer reports earnings Thursday after the market close.
Wall Street is betting that
Lululemon
(ticker: LULU) will meet or beat analyst estimates for the quarter. The company is expected to turn in adjusted earnings of $2.54 a share on $2.17 billion in revenue, according to FactSet. Same-store sales could rise by 12.1%.
Earnings season has been rough on other companies in the athletic wear space. Shares of
Dick’s Sporting Goods
(DKS) and
Foot Locker
(FL), for instance, both plummeted in the wake of weak reports—but Lululemon’s quarter could be very different, analysts say.
“While the macro environment has become increasingly challenging, we’ve seen that high momentum brands have continued to perform well,” wrote Wedbush analyst Tom Nikic in a Wednesday note. Lululemon is one of those brands, he added.
Piper Sandler analyst Abbie Zvejnieks agrees, writing that recent product launches and back-to-school shopping have boosted store visits. Indeed, Lululemon’s foot traffic in the U.S. grew by double-digits every month in the third quarter, and far outpaced traffic among the broader sportswear and sporting goods sector, according to data from Placer.ai. Sales in China could also be a bright spot, Zvejnieks added, thanks to the company’s efforts to tailor its products to local markets.
Lululemon’s high-income consumer base might also help pad the company’s top line. Results from other retailers with exposure to higher-income consumers—including
Abercrombie & Fitch
(ANF) and
Urban Outfitters
(URBN)—suggest this demographic continues to spend, even as other consumers pull back.
That said, even some bulls acknowledge that the anticipation over Lululemon’s report could actually weigh on the stock in the short term, as anything less than a blowout quarter and guidance raise might do little to drive the stock higher. Shares of Lululemon have gained about 18% this year, outperforming the
SPDR S&P Retail ETF,
which has risen 6.4%.
“This is a crowded long amongst hedge funds and expectations are high, which may limit upside in the very near term,” wrote Citi analyst Paul Lejuez in a note last week.
Still, Lejuez has a Buy rating on the shares and says the company could raise its fiscal-year guidance this quarter.
Write to Sabrina Escobar at [email protected]
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