Why Lululemon’s Top Line Is Expected to Expand
Evaluating Lululemon’s 9M16 topline
As we discussed, the Vancouver-based Lululemon Athletica (LULU) is slated to report its fourth-quarter results on March 29. The company’s sales have risen 14.6% YoY (year-over-year) in the first nine months of 2016 to $1.55 million.
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What drove top-line growth?
Growth was driven by improved sales comps along with an increase in square footage. Sales comps improved 8%, 5%, and 7% in Q1, Q2, and Q3, respectively, on a constant-dollar basis. Growth was helped by strong performances in both women’s (especially bras) and men’s categories (specifically ABC pants and Metal Vent.)
Square footage was up 18%, 14%, and 11% during the first three quarters of 2016 compared to the corresponding periods last year.
What to expect in 4Q
For the fourth quarter, management is looking for the top line to expand between 10% and 11.5% compared to last year. This increase is likely to come from a mid-single-digit jump in comps (on a constant-dollar basis) and an expansion in square footage. Total sales are expected to lie in the $775 million to $785 million range.
Wall Street is also in line with LULU management. Analysts are predicting an 11.2% jump in 4Q16 sales to $783.5 million.
ETF investors seeking to add exposure to LULU can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.44% of its portfolio in LULU.
Comparing LULU’s performance to peers
Nike (NKE), the largest sportswear manufacturer in the world, is expected to post its results on March 21. The company’s quarterly top line is likely to expand 5.4% YoY to $8.46 billion.
Under Armour (UAA), which posted quarterly results at the end of January, recorded a 12% increase in revenues to $1.3 billion. The company, however, missed consensus by $100 million.
Read on to the next part of this series to read about LULU’s year-to-date bottom line performance.