Lululemon Athletica inc. LULU reported a strong first-quarter earnings beat on Wednesday, continuing its stretch as one of the hottest companies in a struggling retail environment. Wall Street had plenty to say about lululemon's continued outperformance.
Lululemon shares traded up 1.9% at $174.28.
Morgan Stanley
According to Morgan Stanley analyst Kimberly Greenberger, lululemon is the only soft lines retailer in the firm's coverage that grew EBIT dollars in the first quarter.
Greenberger said the pillars of lululemon’s long-term plan performed well, with women’s bottoms comparable sales up 19% and men’s comparable sales up 26%. The company grew e-commerce sales at 35% and international sales grew 39% year over year.
“All in, lululemon delivered a fine print that especially stands out given overall soft 1Q apparel retail performance,” Greenberger wrote in a note.
Morgan Stanley maintains an Equal-Weight rating and raised its price target from $160 to $163.
E-Commerce And Men's Driving Growth
MKM analyst Roxanne Meyer also highlighted lululemon’s men’s business and e-commerce sales continue to drive upside.
“E-commerce is expected to double in five years, or ~$1.7B in sales. That feels conservative as it assumes a high-teens CAGR from 2020-2023,” said Meyer.
Meyers said she continues to attribute lululemon’s success to innovation, technology and execution, with ongoing strong growth in new customers a key driver of her bull thesis.
MKM maintains a Buy rating and raised its price target from $189 to $215.
Chinese Tariffs De-Risked In Guidance
Bank of America analyst Rafe Jadrosich said lululemon is raising guidance despite de-risking its outlook for the potential implementation of tariffs, noting 6% of US revenue is sourced from China.
Jadrosich maintains a Buy rating with a $200 price target.
Waiting For Better Entry Point
B Riley analyst Susan Anderson said new product rollouts for the second half should keep momentum going for lululemon but the firm remains on the sidelines until it sees a better entry point.
“Lululemon has a strong brand and we believe the new product pipeline, growing men’s business, category expansion, and international growth should drive total revenue growth double digits over the next 5 years,” the analyst said.
B Riley maintains a Neutral rating with a $165 price target.
Oppenheimer
Oppenheimer analyst Brian Nagel says he looks very favorably upon lululemon’s most recent print as results once again topped most bullish Wall Street forecasts.
P“For a while, we have highlighted LULU as a key market share grabber and innovator within athleisure and one of the most compelling growth stories in all of consumer. Last night’s report from LULU goes a long way in helping to support our positive thesis on the company and its shares,” said Nagel.
Nagel maintains an Outperform rating with a $225 price target.
International Growth
KeyBanc analyst Edward Yruma said the company’s 16% comp gain is impressive given the difficulty of its comparison alongside weather and industry challenges. The analyst maintains a Sector Weight rating on the company.
“The +26% men’s comp is particularly impressive and was driven by ongoing strength in tops and bottoms and led by the ABC franchise. Men’s is also benefiting from newly launched boxers, and LULU has plans to further men's product innovation with the launch of an improved Metal Vent Tech collection,” Yruma said.
The analyst also said the Asia-Pacific region provides a very compelling long-term growth opportunity, with China growing 70% year-over-year and is on track to open 10-15 new stores in the country.
Nomura Is Cautious
Nomura analyst Simeon Siegel said unsurprisingly, Lululemon posted comps that are likely the envy of any company in any industry, while still growing margin. The analyst did fear that Lululemon is now fairly valued however, with first quarter comps and earnings beat the smallest since the third quarter of 2017.
“These are relatives, not absolutes, & we are strong believers in LULU the brand. But as hopes mesh closer to reality, we worry shares are capped,” said Siegel.
Nomura maintains a Neutral rating with a $157 price target.
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