Lululemon Poised For Global And Men's Market Expansion, Analysts Adjust Forecasts Following Strong Q1 Results

Zinger Key Points
  • BofA Securities reiterates Buy rating and raises price target from $430 to $440.
  • Wedbush reiterates Outperform rating and raises price target from $397 to $400.

Lululemon Athletica Inc LULU reported better-than-expected first-quarter financial results Wednesday after the bell. The following are the comments from different analysts on the same.

BofA Securities – Reiterates Buy, price target raised from $430 to $440

Analyst Lorraine Hutchinson notes LULU’s improving innovation pipeline will result in accelerating sales trends, particularly as newness and product availability improves for the women’s business in 2H.

The analyst raised the FY24 EPS estimate by $0.70 to $14.27 to reflect the first-quarter beat, stronger sales, and higher interest income.

The international business (22% of sales) remains robust, with total first-quarter sales up 40% ccy and comps up 29%, said the analyst.

The analyst expects clearance to weigh slightly on second-quarter margins (it was a 50bp headwind in the first quarter) before turning positive as product newness drives improved sales.

Wedbush – Reiterates Outperform, price target raised from $397 to $400

Analyst Tom Nikic said while there are undoubtedly some challenges domestically, there remains a long runway internationally and on the men’s side.

LULU can potentially reinvigorate the core U.S. women’s business via product innovation and better sizing/color availability, added the analyst.

The analyst noted the fact that investors were braced for U.S. sales to be flat-to-down, so positive total sales was a better outcome than expected.

J.P. Morgan – Reiterates Overweight, price target lowered from $509 to $457

Analyst Matthew Boss said the first quarter’s +10.4% revenue growth translates to a +23.1% CAGR versus 2019 with continued strength across every single international region and U.S. revenues +2% Y/Y exceeding buyside expectations.

LULU’s growth prospect is supported by significant untapped International presence, outsized growth of men’s, a push into newer categories such as personal care and footwear, and ongoing growth in the e-commerce business to augment low-double-digit growth in the core North America business, said the analyst.

Telsey Advisory Group – Reiterates Outperform, price target lowered from $550 to $470

Analyst Dana Telsey said LULU reported a nice first-quarter beat, with sales, gross margin, and expense deleverage all coming in better than consensus. 

While the U.S. women’s business started the year slow as expected, management is addressing lead times to improve in-stocks in smaller sizes as well as expanding the color palette in the core assortment, particularly leggings, noted the analyst.

In the analyst’s view, the quarter’s results can begin to ease concerns over domestic trends, which were not worse than feared, while improved inventory positioning, innovation, and a wider core assortment palette can lead to better results as the year progresses.

Price Action: LULU shares are trading higher by 5.7% at $325.85 at the last check Thursday.

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