Analysts Raving About Lululemon's Big Quarter

Lululemon Athletica inc. LULU shares are trading higher after reporting impressive fourth-quarter earnings Wednesday.

According to a NPD Consumer panel, the athleisure-brand sold more women’s activewear in the U.S. last quarter than Nike Inc NKE.

The Analysts

• Cowen analyst John Kernan maintains an Outperform rating and raised his price target from $190 to $192.
• D.A. Davidson analyst John Morris maintains a Neutral rating.
• Keybanc analyst Edward Yruma maintains a Sector Weight rating.
• Tigress Financial Partners analyst Ivan Feinseth continues to recommend purchase.

The Theses

Coming off a strong quarter, Lululemon is expanding its online capabilities after seeing online revenue increase 46 percent last year.

Feinseth says the next catalyst for the company comes from potential new announcements at the company’s upcoming investor day April 24, where it's expected to announce new products, international expansion and more details on the formalization of its loyalty plan that is in test phases.

“Lululemon continues to dominate yoga and athleisure wear at premium prices. Current sales momentum should continue for some time as a strong economy and as consumers continue to favor aspirational brand purchases like Lululemon,” Feinseth wrote in his daily newsletter.

Cowen’s John Kernan says Lululemon is the firm's top idea into 2020 and beyond with $10+ in EPS potential.

Yruma said Lululemon’s strong product innovation and commitment to engaging consumer experiences give it significant growth opportunities. New guest acquisition grew 30 percent and the company’s email list grew 70 percent, and the company is seeing strong growth in spend from existing guests with 40 percent increase in transactions by repeat guests.

The analyst reiterated the sentiment that international expansion and the brands men’s business are exciting growth areas, and the company is planning to expand further into men’s running.

“LULU will also lean into loyalty and self-care going forward, which could provide incremental growth with existing guests," Yruma wrote in a note.

John Morris of D.A. Davidson says in the first quarter the company’s management is anniversarying strong increases in product margin and remains focused on gross margin expansion through ongoing supply chain initiatives and scale efficiencies.

Price Action:

Lululemon shares traded higher by up 15 percent at $168.93 Thursday afternoon.

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