Skip to main content

Market Overview

Lululemon's Q2 Didn't Impress Everyone Amid Doubts About The Future

Share:
Lululemon's Q2 Didn't Impress Everyone Amid Doubts About The Future

Reviewing Lululemon Athletica inc. (NASDAQ: LULU)'s second-quarter results, Buckingham Research Group said uncertainty surrounding comp growth and gross margin upside keeps it on the sidelines.

The firm reiterated its Neutral rating and a $55 price target on the shares of the company.

In early trading, shares of Lululemon Athletic were seen surging up 7.42 percent at $61.82.

Analysts Kelly Halsor and John Steger noted that the company's top line notably beat their expectations, with comps up 7 percent and gross margin expanding 220 basis points. The analysts attributed the top line outperformance to product innovation and a stronger marketing campaign, and the margin beat to the sale of an online warehouse, which would not repeat in the second half of 2017.

See also: Contrarian: Amazon Is One Of The Weakest Retailers There Is

However, due to a lack of follow through to the bottom line, the analysts noted that the earnings per share exceeded expectations by a modest 5 cents.

Buckingham Research said it will remain on the sidelines for now, as it believes the company might have to spend more money or sacrifice merchandise margin to drive sales growth.

The firm feels the company needs at least a mid-single-digit comp to leverage fixed costs. Given the limited leeway for merchandise margin improvement in the second-half, the firm said the Lululemon Athletica's path to sustainable top line and margin expansion remains unclear.

"Without visibility to mid-to HSD comp growth and/or additional GM upside, we see limited upside to the stock from here, while downside will also likely be limited near-term as risk to EPS downside remains low," the firm said.

Latest Ratings for LULU

DateFirmActionFromTo
Apr 2021Morgan StanleyMaintainsEqual-Weight
Mar 2021RBC CapitalMaintainsOutperform
Mar 2021BTIGMaintainsBuy

View More Analyst Ratings for LULU
View the Latest Analyst Ratings

 

Related Articles (LULU)

View Comments and Join the Discussion!

Posted-In: Analyst Color Earnings News Guidance Reiteration Sports Analyst Ratings General Best of Benzinga

Latest Ratings

StockFirmActionPT
FIBKStephens & Co.Downgrades
LEAFCanaccord GenuityDowngrades8.5
AGMSidoti & Co.Downgrades115.0
KEXGabelli & Co.Downgrades
OCGNCantor FitzgeraldDowngrades11.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com