Lululemon Earnings: Stifel's 'Thoughts Ahead Of Q1'

Lululemon Athletica inc. LULU is scheduled to report its first quarter financial results on Tuesday, June 9, before the market open and analysts at Stifel provided a preview in a recent report.

According to the note, the firm expects results in line with guidance, which had been initially considered conservative. “Given retailer 1Q results referencing weather, soft traffic trends, and port challenges, we expect inline results will be accepted as adequate (constant currency combined comp up only low-single digits with retail comps down low-single digits and gross margin within the guided range of 49%-50%),” the experts explain.

Beyond this challenging environment, online and in-store checks have shown that markdowns rose year-over-year, keeping the firm cautious on gross margin (they anticipate a gross margin of 49 percent, versus consensus 49.5 percent).

Stifel is modeling earnings of $0.32 per share, in line with guidance but below the Street’s consensus, which, according to Estimize, stands at $0.34 per share, same as the crowd’s.

Revenue is expected to come in somewhere between $415.5 million and $421.42 million.

The firm continues to believe that, “pending inline results in 1Q, sequential improvement to the quarterly retail (cc) comp as the year unfold will be imperative to upside for the stock in 2015.” Their estimates project “a flat retail-only comp in 2Q, and inflection positive in 2H.” They note that their checks show “the Denver store ‘warehouse sale’ to clear merchandise for the region was not isolated to one region [and] believe this signals a shift in clearance strategy from larger warehouse sales to regional sales through the stores which likely benefits comp.”

Now, with the stock trading close to $60, the analysts at Stifel expect any amelioration to trigger a short squeeze.

Stifel maintains a Hold rating on shares of Lululemon.