Lululemon Issues Strong Q4 Guidance, Cowen Projects Upside To Consensus Estimates

Lululemon Athletica inc. LULU raised its fourth-quarter earnings and comp guidance Monday, leading to an analyst price target increase.

The athletic apparel maker lifted EPS guidance from a range of $1.64-$1.67 to $1.72-$1.74, ahead of consensus estimates. Comp guidance was raised from high-single to a low-double digit percentage gain to a mid-to-high teens percentage gain.

“The momentum in our business remained strong throughout the holiday season, reflecting the ongoing success of our product offerings and our connection with guests around the globe," Lululemon CEO Calvin McDonald said following the raise. 

The Analyst

Cowen analyst John Kernan maintained an Outperform rating on Lululemon and raised the price target from $185 to $188.

The Thesis

Following a meeting with Lululemon CFO Patrick Guido, Kernan said Lululemon remains a top idea, with upside to consensus and long-term targets. 

“We believe there is upside to consensus, and our estimate, through probable SG&A leverage next year on low-teens revenue growth that could be upside to our model," the analyst said. 

The trends that drove LULU’s topline performance through Q3 persisted into Q4, Kernan said, noting broad-based strength across women’s pants, bras and men’s.

“The setup for continued merch margin expansion in Q4 and into 2019 remains very encouraging given product mix benefit, full-price sell through and supply chain efficiencies." 

Lululemon said there will be an update on its 2020 targets when the company reports Q4 earnings in March.

Price Action

Lululemon shares were up 1 percent at $141.13 at the close Tuesday. 

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