3 Things To Listen For On Lululemon's Q1 Earnings Call

Credit Suisse issued comments Friday regarding Lululemon Athletica inc. LULU’s first-quarter earnings call, scheduled for June 1 at 5 p.m.

“We are concerned that recent weakness will not abate this quarter given evidence that markdown activity and SKU intensity continue to increase,” said analyst Christian Buss in a note.

Credit Suisse rates Lululemon Neutral with a price target of $56.

3 Things To Listen For

1. The challenging and promotional retail environment Lululemon found itself in is unlikely to be offset by tailwinds from exposure to the athletic category. Buss predicts same-store sales will be down 1.5 percent in Q1, with negative comps continuing until Q3.
2. Gross margin benefits from last year’s supply chain restructuring continue, but at a reduced pace compared the second half of fiscal 2016. The analyst models for 50 basis points year-over-year improvement to 48.7 percent of sales.
3. “We have pushed out our leverage assumption for lululemon into FY18 as the company still expects occupancy costs, partially due to accelerated international store openings, to weigh on the FY17 SG&A rate,” said Buss. They model for 150 basis points deleverage in Q1.

Minutes before the closing bell Friday, shares of Lululemon were down 0.97 percent at $48.22.