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Here's Why lululemon (LULU) Looks Poised for Q1 Earnings Beat

lululemon athletica inc. LULU is likely to witness top and bottom-line growth when it reports first-quarter fiscal 2023 results on Jun 1, after market close.

The Zacks Consensus Estimate for fiscal first-quarter sales is pegged at $1.92 billion, indicating a 19.3% increase from the prior-year quarter's reported figure. The Zacks Consensus Estimate for the company's fiscal first-quarter earnings is pinned at $1.97, suggesting a 33.1% rise from the $1.48 reported in the year-ago quarter. Earnings estimates have moved up 2.1% in the past 30 days.

The company delivered an earnings surprise of 3.5% in the last reported quarter. LULU's bottom line beat estimates by 6.8%, on average, in the trailing four quarters.

lululemon athletica inc. Price and EPS Surprise

 

lululemon athletica inc. Price and EPS Surprise
lululemon athletica inc. Price and EPS Surprise

lululemon athletica inc. price-eps-surprise | lululemon athletica inc. Quote

Key Factors to Note

lululemon has been benefiting from continued business momentum, backed by a favorable response to its products. Improvement in store traffic, as consumers returned to stores for shopping, as well as solid online show, bodes well. The persistence of the trend is expected to have boosted the company’s top line in the to-be-reported quarter.

LULU has been capitalizing on the importance of physical retail and the convenience of online engagement, which is expected to have boosted its top and bottom-line performances. The company has been focused on investments to enhance the in-store experience. It has been leveraging its stores to facilitate omni-channel capabilities, including buy online pick up in store (BOPUS) and ship from store. It has been implementing several strategies to improve the guest experience and reduce wait time. Store expansion efforts are also expected to have acted as an upside.

lululemon has been gaining from improving online demand. Its accelerated e-commerce investments to ensure a robust shopping experience bode well. The company has been investing in developing sites, building transactional omni functionality and increasing fulfillment capabilities. Some notable efforts in this space are curbside pickups, same-day deliveries and BOPUS. Gains from these initiatives are likely to get reflected in its first-quarter fiscal 2023 top-line results.

On the last reported quarter’s earnings call, management anticipated the strong business momentum to continue throughout fiscal 2023. LULU expects net revenues of $1.890-$1.930 billion for first-quarter fiscal 2023, indicating 17-20% year-over-year growth. The company projects EPS of $1.93-$2.00 for the fiscal first quarter.

However, lululemon has been witnessing elevated costs and increased markdowns. Also, higher investments in the distribution center network and more normalized markdowns from the low levels witnessed in the prior year are expected to have hurt margins in first-quarter fiscal 2023. For the first quarter of fiscal 2023, management anticipates a 60-80 bps deleverage in the SG&A expense rate for the fiscal first quarter, driven by higher investments.

What the Zacks Model Unveils

Our proven model conclusively predicts an earnings beat for lululemon this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

lululemon has a Zacks Rank #3 and an Earnings ESP of +0.24%.

Other Stocks Poised to Beat Earnings Estimates

Here are some other stocks that you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat:

Campbell Soup CPB currently has an Earnings ESP of +0.58% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports third-quarter fiscal 2023 numbers. The Zacks Consensus Estimate for Campbell’s quarterly revenues is pegged at $2.22 billion, which suggests an increase of 4.2% from the figure reported in the prior-year quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus mark for CPB’s quarterly earnings has been unchanged in the past 30 days at 65 cents per share. The consensus estimate suggests a 7.1% decline from the year-ago quarter’s reported number.

Macy's M currently has an Earnings ESP of +2.81% and a Zacks Rank #3. The company is expected to register top and bottom-line declines when it reports first-quarter fiscal 2023 results. The Zacks Consensus Estimate for quarterly earnings per share of 46 cents suggests a decline of 57.4% from the year-ago quarter’s reported figure.

Macy’s top line is anticipated to move down year over year. The consensus mark for revenues is pegged at $5.1 billion, indicating a decrease of 4.4% from the figure reported in the year-ago quarter.

Carnival Corp. CCL currently has an Earnings ESP of +0.42% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports second-quarter fiscal 2023 results. The consensus mark for CCL’s quarterly revenues is pegged at $4.8 billion, which suggests a rise of 100% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Carnival’s loss has been unchanged in the past 30 days at 34 cents per share. The consensus loss estimate indicates a decline from a loss of $1.64 reported in the year-ago quarter.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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