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Lululemon Lifts Q4 Outlook On Successful Holiday Feat


Lululemon Athletica Inc. LULU was among the retailers that emerged strong this holiday season, which has lifted the overall outlook for the retail sector. The holiday season this year was the best in a few years, when retailers struggled attract traffic in stores. However, this year the cash registers at stores jingled as much as online channels, letting the retailers rejoice.

Lululemon revealed that the holiday season was better-than-expected driven by accelerating trends across all parts of its businesses. As stated by the company in December, the company's holiday season performance benefited from the highest traffic and largest ever sales on Black Friday and Cyber Monday. Further, the company anticipates business strength and current trends to sustain throughout 2018 and beyond.

Consequently, the company raised revenue and earnings guidance for the fourth quarter of fiscal 2017, ahead of the upcoming ICR conference.

Lululemon now expects fourth-quarter net revenues in the range of $905-$915 million, compared with $870-$885 million anticipated earlier. However, the company continues to project total comparable stores sales (comps) to grow in high-single digits, on a constant dollar basis.

The company now envisions earnings in a band of $1.24-$1.26 per share, while adjusted earnings per share (excluding effects of restructuring ivivva operations) are anticipated in the range of $1.25-$1.27. This marks a considerable improvement from the previously projected earnings of $1.18-$1.21 per share and adjusted earnings of $1.19-$1.22 per share. The Zacks Consensus Estimate for the current quarter is pegged at $1.22 per share.

The company's guidance assumes shares outstanding of about 135.6 million and does not include any impact from share repurchases. Further, the company continues to anticipate tax rate of 30.4%, excluding the impact of the recently issued U.S. tax reform. However, the company expects to record a significant income tax charge in the fourth quarter related to a one-time deemed repatriation tax on foreign earnings. The impact of the tax reform is likely to be favorable to the company's effective tax rate in fiscal 2018.

The holiday season this year was overwhelming for retailers backed by an increase in consumer spending. According to MasterCard SpendingPulse, sales (excluding automobiles) during Nov 1 to Dec 24, 2017 jumped 4.9% compared with 3.7% rise in the prior-year period. This marked the biggest year-over-year increase in holiday spending since 2011. Further, this data has also beat the National Retail Federation's ("NRF") projection of 3.6-4% rise in November and December sales (excluding autos, gas and restaurant sales) and eMarketer's forecast of 3.1% jump in holiday sales.

Some of the gainers during the period included American Eagle Outfitters Inc. AEO, J. C. Penney Company, Inc. JCP and Macy's Inc. M, which reported comps growth of 8%, 3.4% and 1.1%, respectively, during the holiday season.

Coming back to Lululemon, the aforementioned news lifted its stock price in the pre-market session yesterday before it closed down to reflect minor upside. Nonetheless, Lululemon's shares have gained a solid 24.8% in the last three months, outperforming the industry's growth of 12.5%. We believe that this solid stock momentum is attributable to the company's strategic growth initiatives and solid sales history.

The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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