Lululemon’s [LULU] share price has soared so far this year. The stock reached an intraday peak of $383.20 on 26 August before closing at $381.50. A few days later, the stock peaked again to close at $398.29 on 2 September — a 71.9% increase for the year.
This comes after Lululemon’s share price suffered a significant slump, including a new 52-week low of $138.98 on 16 March. The fall was in line with the coronavirus panic that was affecting the markets at the time.
Since then, Lululemon’s share price has shown signs of a slow and steady recovery. The stock managed to meet and exceed the value of its pre-slump peak of $263.68 (achieved on 20 February) when it closed at $267.53 on 21 May. The latter marked a new threshold, one which Lululemon’s share price is yet to fall below.
Since its recent peak, however, Lululemon’s share price has faltered, dropping 9.3% from 2 September to close at $361.41 on 4 September.
As the athletic clothing brand prepares to announce its second-quarter earnings report for fiscal year 2020 on 8 September, what should investors expect of Lululemon’s share price?
How has Lululemon been performing?
When Lululemon released its first-quarter results on 11 June, it reported earnings of $0.22 per share. This lagged behind the Zacks consensus estimate of $0.26, and represented a 70% decline from the earnings of $0.74 per share from the same quarter a year ago. Unsurprisingly, these disappointing results saw Lululemon’s share price slide.
The athleisure brand also announced that revenue had dropped by 17% to $652m, missing analysts’ projections of $711m by 8.3%.
Lululemon's Q1 revenue - a 17% YoY drop
According to Zacks, “results were primarily marred by extended store closures due to the COVID-19 outbreak, offset by solid ecommerce performance.”
Following the results, Lululemon’s share price fell 5.1% in after-hours trading.
Looking ahead to its upcoming earnings release, the consensus estimate is that the company will post earnings of $0.51 per share — a decline of 46.9% year-on-year. Regarding revenue, analysts expect Lululemon to have made $833.81m for the quarter, a 5.6% decrease from the same time last year.
For the full-year, Zacks expect earnings of $4.23 per share, down 14.2% from last year and revenues of $4.06bn, an increase of 1.9% from 2019. If these predictions are accurate, Lululemon’s share price could go either way following the earnings announcement.
Lululemon's estimated Q2 revenue
What the analysts are saying
“Lululemon is understandably not at its best right now,” Rick Munarriz, wrote in The Motley Fool. “Revenue declined 17% in its previous quarter, and that's not a surprise with its stores shuttered for most of the period. It was ecommerce propping up the top line, accounting for half of the quarter's sales. It also doesn't help that there's not a demand for fashionable exercise with most folks working out from home.”
“Revenue declined 17% in its previous quarter, and that's not a surprise with its stores shuttered for most of the period. It was ecommerce propping up the top line, accounting for half of the quarter's sales. It also doesn't help that there's not a demand for fashionable exercise with most folks working out from home” - Rick Munarriz
Despite this, the consensus among 36 analysts polled by CNN Money is to Buy. This comes from a majority of 21, with one analyst giving the share price an Outperform rating and 13 rating the stock a Hold. On the other hand, only one analyst suggests to Sell Lululemon’s share price.
Among 32 analysts offering 12-month forecasts for Lululemon’s share price, CNN Money reports a median target of $347.50, with a high estimate of $460 and a low of $192. The median estimate represents a 4% drop from its 4 September closing price.
“ Wall Street pros see a 6% decline in revenue and an even sharper slide in profitability. Investors are more optimistic,” Munarriz added, pointing to the fact that the shares hit an all-time high in late August — a rare occurrence among retail stocks lately.
“It had better be a good report, and the guidance needs to be even better.”
|PE ratio (TTM)||81.92|
|Quarterly Revenue Growth (YoY)||-16.7%|
Lululemon share price vitals, Yahoo Finance, 7 September 2020