Lululemon Athletica (NASDAQ:LULU) shares hit all-time high

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Updated: 09 September 2019
  • Sportswear retailer posts $0.96 EPS and $883m revenue versus $0.89 and $842.4m consensus
  • Shares rise to $200.19 on Friday, up 64% year-to-date
  • Wall Street veteran Jim Cramer tells investors to “just keep buying the stock, keep buying Lulu even up here.”

Analysts made a case for Lululemon Athletica (NASDAQ:LULU) being a ‘best-in-class’ retail brand on Friday.

Stock soared in trading to a record high on an excellent corporate report showing earnings and revenue beats, and wider gross and operating margins in Q2.

Lulu has delivered EPS and revenue beats for every quarter during the last two years and it continued that hot streak by posting $0.96 EPS – seven cents ahead of the consensus.

It also posted $883.35m group revenues – $40m up on forecasts – and a 22% increase on the comparable period in 2018.

There were other notable gains for the sports apparel retailer sprinkled throughout the report.

Comparable sales climbed 11% to more than double the consensus (+5.2%) and direct-to-consumer revenue grew 31% year-over-year, while gross margin rose from 54.8% to 55% and operating margin improved to 19.0%.

Lulu management followed up by boosting guidance for the full year.

Just a few months ago, Lululemon Athletica expected revenue to top out at $3.77bn, but that figure has now been revised upward to $3.80bn–$3.84bn.

The higher end of anticipated EPS also increased by 12 cents to $4.70.

CEO Calvin McDonald said: “On the bottoms business, as you know, it’s a core category for us in both women’s and men’s and in Q2 we saw both of those continue to perform very strong with double-digit comp performance.

“In fact, men’s outperform women’s as we continued to see success in our men’s initiative as one of the key Power of Three growth initiatives.”

Lululemon shares advanced 6% to push past the $200 mark on Friday.

The latest surge means shares have rallied 64% since 1stJanuary and analysts expect the upward trend to continue.

Just six months ago, the stock was changing hands at around $160–$165, but it could now reach $210–$212 in the coming days.

Credit Suisse analyst Michael Binetti was bullish after adding $37 to a new, higher $235 price target on Friday.

Binetti noted: “We think the combination of ongoing top-line momentum and accelerating flow-through potential should continue to support EPS upside to Consensus, and continue to warrant a valuation premium at the top of the peer group.”

Analysts may soon be shifting their positions but, at the moment, Lulu has 17 Buy ratings compared to 12 at Hold.

There is not a single bear at Sell and the average price target is $209.04.

The apparel sector was back in vogue on Friday following Lululemon’s ample returns, which were set against a calmer backdrop in trade relations between Washington and Beijing.

Some of the notable gains during the final session of the week included Ascena Retail Group (NASDAQ:ASNA) (+21%), Vera Bradley (NASDAQ:VRA) (+5.4%), Tailored Brands (NYSE:TLRD) (+8%) and J.C. Penney (NYSE:JCP) (+4%).