Lululemon Athletica inc. (NASDAQ:LULU) announced on Wednesday, January 12th that the company is updating its fourth quarter fiscal 2014 net revenue and earnings guidance following a strong holiday season. As a result, Lululemon shares increased almost 6% in trading on Wednesday morning.
The athletic retailer is now expecting its Q4 net revenue to range from $595 million to $600 million, compared to their previous guidance of $570 million to $585 million. This increase in the company’s net revenue guidance stems from a total comparable sales growth expectation between 6%-7% on a constant dollar basis. In addition, Lululemon also raised their diluted earnings per share forecast to $0.71 to $0.73 from $0.65 to $0.69.
Lululemon CEO, Laurent Potdevin said of the updated guidance, “Backed by improving trends and strong holiday results, we are entering 2015 in very good shape. Our guests are responding positively to both the women’s and men’s product assortment, and with the build-out of our senior leadership team near completion, I feel confident in our ability to execute on our growth strategies.”
On January 12th, Stern Agee analyst Sam Poser upgraded Lululemon from Underperform to Neutral following the retailers Q4 positive guidance update. Despite upgrading his rating on the stock, Poser is not exactly optimistic about Lululemon, noting “Sales acceleration during the holiday leads us to reevaluate our negative sentiment of the brand. However, we are unsure if a mid-single digit same-store-sales momentum is sustainable.” He also added, “We are still unconvinced that historical gross margin% will be achieved given the continued mix shift to lower margin seasonal/fashion items” and “heavy spending to take the brand international will likely hamper EPS growth for the foreseeable future.”
Sam Poser currently has an overall success rate of 71% recommending stocks and a +16.1% average return per recommendation, measured over one year.
Separately on January 13th, Cannacord Genuity analyst Camilo Lyon maintained a Hold on Lululemon but increased his price target from $48 to $58 following a meeting with the retailer’s management team and their positive Q4 preannouncement. Lyon noted, “We came away incrementally more positive on the progress LULU is making in its recovery. The business appears to have stabilized and the team is focused on building on the momentum from 2014 into 2015 which should continue to see improved product assortments and presentations in pants and tanks.” However, the analyst believes “there is more work to be done for [Lululemon] to recapture the comp and margin levels of years past. Moreover, we believe the stock has run too far too fast and would prefer to take a more constructive stance on it at lower levels.”
Overall, Camilo Lyon currently has a 57% success rate recommending stocks and a +8.8% average return per recommendation, measured over one year.
On average, the top analyst consensus for Lululemon on TipRanks is Hold.