Lululemon's Global Expansion And Steady Performance: Analyst Sees Robust Q3 Amid Retail Challenges

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of Lululemon Athletica Inc LULU with an unchanged price target of $450.

LULU is set to report third-quarter results after the market closes on Thursday, Dec 7, 2023.

The analyst continues to look for 3Q23 EPS of $2.28, up from $2.00 last year, coming in at the high-end of the guided range of between $2.23-$2.28 and in line with consensus.

The analyst expects total sales growth of 17.9% YoY to $2.189 billion, in line with the market's expectation of $2.188 billion.

The company’s current real estate strategy is focused on international expansion, with 35 out of the 55 openings planned for this year in international markets, up from 30-35 prior, the majority of which will be in China, writes the analyst.

Despite difficult comparisons and a challenging macro backdrop, LULU continues to churn out impressive results with a beat and raise in each quarter of the fiscal year so far.

LULU continues to work through its inventory (up 13.6% in Q2 versus 23.9% in Q1), while reaching its highest gross margin in a second quarter in recent history, notes the analyst.

While other retailers have called out cautious and choppy consumer trends with their FY23 outlooks, the company raised its guidance this past quarter, with no indication that shoppers are pulling back, in the analyst’s view.

The analyst remains encouraged that LULU continues to deliver strong results, while investing in future growth opportunities from a position of strength.

Price Action: LULU shares are trading higher by 3.98% at $464.59 on the last check Friday.

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