Wedbush sees strength in Lululemon heading into 2016

Wedbush issued a report on the Specialty Retail industry, highlighting Lululemon Athletica inc. LULU heading into the holiday shopping season and the new year. Currently, Wedbush rates Lululemon as Overweight with a $78 price target. Morry Brown and Taryn Kuida, analysts at Wedbush, wrote, "We assign...a premium to the specialty retail peer set...given LULU's better real estate profile, higher unit growth rate, and higher returns on capital relative to peers… We believe the primary risk (increased competition) is unlikely to derail fundamentals in the near term (assuming solid execution)." Lululemon will report earnings on Wednesday, December 9th before the market opens for trading. Wedbush expects Lululemon to report third quarter earnings of $0.38 per share, above the consensus estimates of $0.35-$0.37 per share. In the firm's investment thesis Wedbush believes that investors aren't fully valuing the company's international growth opportunity, as the company could expand operations in new markets of Europe and Asia in the next two years. Furthermore, analysts at Wedbush see potential for improving supply chain efficiency and investments in product design leading to the company increasing their profitability. Lululemon last traded at $49.18.