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“Lululemon (NASDAQ:) rallies after topping estimates for the vacation quarter, posting robust steering”. This was one of many headlines that broke shortly after the athleisure firm launched its fiscal on Tuesday night and which summed it up properly.
They reported that comparable gross sales rose 23% which was effectively forward of the consensus, whereas income was in-line with year-on-year progress of 23%. The 2-year income comparisons have been additionally in focus as these skip the volatility of the pandemic, and confirmed 50% income progress and 46% web earnings progress. Lulu’s earnings per share comfortably beat analyst expectations as effectively, to spherical off what can .
After buying and selling up almost 4% in Tuesday’s session in anticipation of the discharge, their shares jumped within the after-hours session and have been up one other 8% in Wednesday’s pre-market buying and selling. Wall Avenue, whereas pleased with the headline figures, appears to have been significantly impressed with administration’s ahead steering. Lululemon reported that for the total yr, they count on FY22 income of $7.49 billion to $7.615 billion versus $7.24 billion and EPS of $9.15 to $9.35 versus the $9.05 consensus.
Upside Shock
These sorts of upside surprises are precisely what bulls wish to see in quarterly earnings reviews, and are made all of the sweeter when an organization’s inventory has been below stress within the weeks main as much as the discharge. That is definitely true of Lulu.
Coming into the center of this month, their shares have been down greater than 40% from final November’s all-time excessive. It’s honest to say we are able to count on the following few classes to start out given it doesn’t appear like the worst-case eventualities will come to move. In truth, they’ve already rallied as a lot as 25% from this month’s low, suggesting that various have been beginning to suspect this week’s earnings report held a shock in retailer.
Lululemon CFO Meghan Frank was justifiably upbeat on the corporate’s outlook, saying
“our outcomes have been pushed by persistently robust efficiency throughout our merchandise, channels, and areas. As well as, for each the fourth quarter and full yr, we delivered income progress above our Energy of Three objectives, regardless of the continued affect of COVID-19 and international provide chain points. We’re happy to see our momentum proceed firstly of 2022 and are optimistic about “
Not solely do traders have spectacular income progress performing as a tailwind, however the newest announcement of a $1 billion share buyback plan can also be solely going to bolster the bull’s case for the foreseeable future.
Corporations usually solely buy again their very own shares after they assume they’re chronically undervalued to honest worth, and it’s a sign to the market that administration is keen to place its cash the place its mouth is.
Getting Concerned
There’s quite a bit right here for these of us on the sidelines to be contemplating. Lulu was one of many standout performers of the pandemic, placing even a few of the high-flying tech shares to disgrace with their 270% peak to trough rally. It seems folks like to put on snug garments when caught at residence, who knew?
Whereas their shares have definitely suffered in latest months as market sentiment has turned away from excessive progress shares and into worth, Lulu continues to be in as robust a place because it’s ever been. Their digital enterprise is powerful, whereas time and time once more footfall at their shops has been among the many quickest to bounce again from any COVID-related bumps.
BTIG picked up on this development earlier this quarter after they reiterated their Purchase ranking on Lululemon shares, and assigned a recent worth goal of $489. From the place shares closed on Tuesday, this means there’s an upside available within the area of 40%.
This ought to be sufficient to tempt in even the extra value-focused investor, because the latest sell-off has solely widened the shopping for alternative right here. With a transparent exit level beneath the latest low of $280, the risk-reward profile is nearly as good because it will get in progress shares proper now.
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