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Wall Street Downgrades Lululemon Athletica after Its 4Q16 Results

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Wall Street Downgrades Lululemon Athletica after Its 4Q16 Results PART 2 OF 5

LULU Beats 4Q16 Top Line but Warns of a 1Q17 Slowdown

Analyzing Lululemon’s 4Q16 top line performance

As discussed, Lululemon Athletica (LULU) reported its results for 4Q16 and 2016 on March 29, 2017. The company’s top line rose 12% YoY (year-over-year) to $790 million, $6.3 million higher than analysts’ consensus expectation. 

LULU’s management had guided for a 10%–11.5% yearly rise in its 4Q16 sales.

LULU Beats 4Q16 Top Line but Warns of a 1Q17 Slowdown

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Apparel giant Nike (NKE), which reported its quarterly results on March 21, missed consensus estimates as it continued to face increasing competition in the home market. The company’s top line rose 5% YoY to $8.4 billion.

PVH Corporation (PVH), which reported its quarterly results on March 24, recorded a 0.2% fall in its top line to $2.1 billion. However, the company performed better than expected thanks to its robust and growing international sales.

What drove Lululemon’s 4Q16 sales?

LULU’s 4Q16 sales growth was driven by an 8% YoY rise in its total comparable sales and an 11% YoY rise in its square footage. While its brick-and-mortar comps rose 6%, its eCommerce comps rose 12% during the quarter.

2017 guidance

Lululemon’s 2016 sales improved 13.7% YoY to $2.3 billion. In 2017, the company’s management expects its revenue to fall in the $2.55 billion–$2.60 billion range, rising 10% at the midpoint.

However, the company’s management has warned about a slower first quarter, saying that an unsatisfactory product assortment has resulted in weaker online sales and fewer footfalls in its stores.

“We have clearly identified the issues, an assortment lacking depth and color for spring compounded with visual merchandising,” said CEO Laurent Potdevin.

LULU’s 1Q17 comparable sales are expected to fall in the low single digits. Its total revenue is expected to land between $510 million and $515 million, compared to analysts’ consensus estimate of $553 million.

ETF investors seeking to add exposure to LULU can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.36% of its portfolio in LULU.

Move on to the next article to read about LULU’s bottom line performance.

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