Stock (Symbol) |
Lululemon Athletica (LULU) |
Stock Price |
$370 |
Sector |
Retail and Travel |
Data is as of |
April 19, 2023 |
Expected to Report |
May 31 |
Company Description |
![]() The Company’s segments include Company-operated stores and direct to consumer. Its apparel assortment includes items such as pants, shorts, tops, and jackets designed for a healthy lifestyle, including athletic activities such as yoga, running, training, and other sweaty pursuits. It also offers fitness-related accessories. Its Company-operated stores include approximately 600 stores in 17 countries. Its retail stores are located primarily on street locations, in lifestyle centers, and in malls. Its direct to consumer segment includes www.lululemon.com, other country and region-specific websites, and mobile applications, including mobile applications on in-store devices. The Company also conduct business through MIRROR, which offers in-home fitness through a workout platform; operate outlets and temporary locations. Source: Refinitiv |
Sharek’s Take |
In my last Lululemon (LULU) research report, I was worried the company would have to mark down items due to inventory levels being up 85% in a year. But it turns out this helped boost sales, which jumped a solid 30% last quarter. Profit margins did decrease a bit, which management had worked us about, but profit growth was still 31% last quarter. Direct to consumer sales jumped a whopping 37% and accounted for more than half (52%) company sales. Stats from last qtr include:
Lululemon is a Canadian designer, distributor, and retailer of high-quality athletic appeal and accessories, marketed under the Lululemon brand. The brand is known for its technically advanced fabrics, with a superior feel and fit. Apparel items include pants, shorts, tops and jackets designed for yoga, running, and training. During 2022 the company opened 81 new stores to bring its total to 655 stores worldwide. Plans are for 45-50 new stores in 2023, including 30+ in China and international markets. Mini-catalysts for future growth opportunity include:
Management is optimistic about growth opportunities of Lululemon and laid out new growth plans called “Power of Three x2.” This calls for doubling revenue in five years from $6.25 billion in 2021 to $12.5 billion in 2026. Plans are for International revenue to quadruple from 2021 to 2026. LULU stock has been one of the best during the past decade, and analysts expect the growth to continue. Analysts give the stock an Estimated Long Term Growth Rate of 17% per year. The stock currently has a P/E of 32. The company’s financial position and balance sheet are strong with $1.2 billion in cash and equivalents, and management even buys back stock, which is rare for a growth stock. In 2022, management repurchased $444 million in stock. LULU is part of the Growth Portfolio and Aggressive Growth Portfolio. I think its a 30% grower long-term. |
One Year Chart |
![]() This stock had a P/E of 62 when it was $465 in November 2021. That was too high, and the stock has since digested some of the prior gains. Now with a P/E of 32, the stock has gone from overvalued to undervalued. Quarterly profit growth has been solid the past year. But revenue growth is expected to slow from 30% to 19% next quarter, and this could lead to profit growth simmering down somewhat. The Est. LTG is 17% this qtr, down from 22% last qtr. I think LULU is a 30% grower. |
Earnings Table |
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Revenue growth was driven by strong demand for their products in North America and international markets. Growth was led by strength in transactions from new (+30%) and existing customers (+35%) and the normalization of their buying behavior towards full price and markdown products. Ecommerce sales were outstanding. China revenue increased more than 30%. The at-home fitness space remains challenged. Annual Profit Estimates grew this qtr. Here’s some far-reaching estimates for the upcoming years: Quarterly Profit Estimates are for 33%, 14%, 12%, and 12% profit growth in the next four qtrs. For next qtr, management expects revenue to grow 18%, analysts think that LULU revenue will grow 19%. Profit growth could be well above revenue growth due to lower air freight costs. |
Fair Value |
![]() Lululemon has a fiscal year end of January 31. We refer to the fiscal yer end January 31, 2023 as “2022” as 11 months are in calendar year 2022. |
Bottom Line |
![]() Lululemon delivered a sensational quarter. Momentum is high. More online sales, rapid International expansion and new products like SenseKnit, Hike, and the sneaker lineup should keep growth humming along. LULU moves up from 6th to 5th in the Growth Portfolio Power Rankings. The stock will stay at 6th in the Aggressive Growth Portfolio Power Rankings too. |
Power Rankings |
Growth Stock Portfolio
5 of 27Aggressive Growth Portfolio 6 of 19Conservative Stock Portfolio N/A |