Lululemon Athletica Q3 Earnings Preview

Lululemon Athletica Inc. LULU will report its Q3 earnings on Thursday. The average Q3 analyst revenue estimates for the company were $424.60 million with EPS of $0.38.  

Ahead of the earnings release the stock traded higher Wednesday morning at $48.33, up 1.26 percent.

Several analysts provided earnings previews for the company, below are highlights along with current ratings and price targets.

Mizuho - Neutral, $40 price target

“We anticipate solid 3Q results (potential for slight beat from SG&A) and guidance and note ~+20 percent share appreciation since 2Q results likely reflects expectations for a potential beat/raise. Although we are encouraged by efforts to improve product designs and product flow, checks suggest the continuation of sluggish consumer spending amidst rising competition may have hampered meaningful sales acceleration during the quarter and early 4Q. Moreover, we remain concerned with the plans to invest behind lower margin seasonal goods (potential for markdown liability) as improved supply chain efficiencies may not offset margin declines until FY16.”

“Our 3Q EPS estimate remains $0.38 vs. $0.45 LY on total comps of +2.2 percent vs. +10 percent LY, in-line with guidance for EPS of $0.36-0.38 on +LSD comps.”

Deutsche Bank - Hold, $40 price target

“Into 3Q results, the primary investor focus will again be on the company’s comp and whether trends have inflected positive, as guidance suggested. While we acknowledge the brand's strong product line-up and its potential long-term opportunities, we remain cautious on the stock in the face of what we believe are still weak comps and elevated SG&A spend this year (and perhaps next year as well). Coupled with valuation at ~26x/~22x FY15/16 P/E, these factors keep us at HOLD.”

“For 3Q, our EPS forecast is $0.38, in line with Thomson One consensus. We arrive at our estimate based on +2.5 percent comps (B&M and e-com), 51.0 percent gross margin (-290 bp y/y), and 18.0 percent (-630 bp y/y).”

Topeka - Buy, $55 price target

“After a difficult 2013 and significant changes in management, we believe LULU is on the path to improved performance, having worked to improve its product, sourcing, logistics and marketing in the past year. After an unexpected beat and raise in 2Q, we believe LULU has been able to further improve in 3Q as its strategic initiatives have been able to more fully take hold. We continue to see LULU as the premium brand in the strongest sector in apparel with plenty of growth ahead of it. A favorite name for holiday and 2015, we reiterate our Buy rating on LULU.”

Topeka estimated Q3 revenue at $430.1 million with EPS of $0.40.

D.A. Davidson and Wells Fargo also recently commented on the company.