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Analysts React to Lululemon's Revised Guidance

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On Monday, Lululemon Athletica (NASDAQ: LULU) updated its net revenue and earning guidance for the fourth quarter of fiscal 2013.

The company now anticipates its net revenue to be in a $513 million to $518 million range. The company previously guided its net revenues to be in a range of $535 million to $540 million. The consensus estimate is for revenues to total $543 million.

The company lowered its EPS guidance to a range of $0.71 to $0.78. The company previously guided its EPS to be in a range of $0.78 to $0.80. The consensus estimate for EPS is $0.79.

“We were on track to deliver on our sales and earnings guidance through the month of December; however, since the beginning of January, we have seen traffic and sales trends decelerate meaningfully,” John Currie, Lululemon's CFO stated in a press release. “Based on this recent performance and assuming these trends continue through the remainder of January, we are reducing our outlook for the fourth quarter.”

Related: lululemon athletica inc. Updates Guidance for Fourth Quarter of Fiscal 2013 Ahead of Presentation at ICR XChange

Shares of Lululemon tumbled to new 52 week lows of $49.00 Monday morning. The last times shares traded below $50 were back in December 2011.

Lululemon will be speaking at the ICR XChange Conference on January 14 at 11:40AM. The company is likely to address its guidance and other areas of interest during the event.

Baird Research: Stage is set for less volatile 2014

Mark Altschwager, analyst at Baird Research wrote that despite the lowered guidance, Lululemon represents a significant growth story.

“Over the next three to five years, we see potential for Lululemon to growth revenue and EPS 20 percent plus on average via unit expansion (near term focus on U.S.), double-digit comps, e-commerce growth (including internationally), and possibly slight margin improvement,” Altscwager wrote in a research note on Monday. “Long-term growth should be supported by international expansion, as well as expanding the ivivva concept.”

Altschwager's bullish views remain in place despite the lowered guidance.

“Slowing comps are a concern and the new CEO's strategic plan is a wild-card for 2014. However, we think the stage is set for a less volatile 2014 and note that Lululemon controls its destiny more so than any other retailer,” Altscwager wrote.

Shares remain Outperform rated with a price target lowered to $70 from a previous $76.

Cowen and Company: Price target slashed nearly in half

Faye Landes, analyst at Cowen and Company wrote that Lululemon is a marvelous brand with growth opportunities but the company faces issues with leveraging its brand equity into revenues.

“We continue to think that Lululemon makes great products that many consumers love, but for now that is not enough to drive solid results,” Landes wrote in a research report on January 13. “Maybe Lululemon customers have shifted to more of a replacement than stock-up mode, which would mean fewer sales per person, and maybe competition is taking little bites out of Lululemon's business, especially among less hard core customers.”

Landes indicated a frustrated tone in the research report. “We are losing count of the number of intraquarter guidedowns that the company has had in the past year plus, whish is not what we, or anyone else, wants to see in what is ostensibly a growth stock.”

According to the analyst, Lululemon is the first yoga apparel brand to achieve scale and favor positively in focus groups. Despite the positive view of the company's products, Landes prefers to sit on the sidelines and wait for the company to further address its issues.

Shares were downgraded to Market Perform from Outperform with a lowered price target of $48, down from a previous $90.

Topeka: bump in the road

Dorothy Lakner, analyst at Topeka Capital Markets wrote that Lululemon's lowered guidance does not shave the overall positive view of the company.

“The company moves into 2014 with a new team and an opportunity to continue to build on its strong franchise in athletic-inspired clothing,” Lakner wrote in a research report on January 13. “We knew there were likely to be bumps in the road when we initiated.”

Lakner recommended buying shares on Monday's weakness. The analyst maintained a Buy rating on shares with a $70 price target.

Latest Ratings for LULU

DateFirmActionFromTo
Sep 2019MaintainsOutperform
Sep 2019ReiteratesBuy
Sep 2019MaintainsEqual-Weight

View More Analyst Ratings for LULU
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Posted-In: Baird Research Cowen and Company Dorothy Lakner Faye LandesAnalyst Color News Guidance Analyst Ratings

 

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