Recently, specialty retailer Lululemon Athletica Inc. (LULU) announced its financial results for the first-quarter 2011.
Street analysts had nearly a week to ponder on the news. In the paragraphs that follow, we cover the recent earnings announcement, subsequent analysts’ estimate revisions as well as the Zacks Rank and long-term recommendation on the stock.
Earnings Review
Lululemon reported robust first-quarter 2011 adjusted earnings of 44 cents a share, up 63.0% from the year-ago figure of 27 cents, handily beating the Zacks Consensus Estimate of 38 cents. The earnings growth was primarily driven by strong top-line growth and improved margins achieved through disciplined management and operational efficiencies.
The company's 16.0% increase in comparable-store sales and 51.0% rise in Direct-to-Consumer revenue aided the 35.0% year-over-year increase in first-quarter 2011 total revenue, which climbed to $186.8 million from $138.3 million reported in the year-ago quarter. Total revenue beat the Zacks Consensus Estimate of $180.0 million.
(Read our full coverage on this earnings report: Lululemon Beats Analysts' Views)
Agreement of Estimate
For the second quarter of fiscal 2011, out of 18 analysts covering the stock, 13 have revised their estimates upward, while none moved in the opposite direction in the last 7 days. For fiscal 2011, out of 14 analysts, 11 analysts have positively revised their estimates while 1 moved downward in the last 7 days.
Magnitude of Estimate Revisions
Taking into effect positive analyst revisions over the past one week, the Zacks Consensus Estimate for the second quarter of fiscal 2011 has moved up by 4 cents (from 40 cents to 44 cents), while upward revision for 2011 led to an increase in the Consensus Estimate by 11 cent to $2.16.
Our Recommendation
We believe that Lululemon's strategic initiatives coupled with better inventory management and e-commerce business will boost both the top and bottom lines. However, the company faces intense competition from national and regional competitors such as Nike Inc. (NKE) and Under Armour Inc. (UA) which may dent its future performance.
Currently, Lululemon maintains a Zacks #2 Rank, which translates into a short-term “Buy” rating. Moreover, we retain a long-term 'Outperform' recommendation on the stock.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at: http://www.zacks.com/education/
LULULEMON ATHLT (LULU): Free Stock Analysis Report
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