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Sales Projections: Lululemon Athletica’s Performance in 3Q16

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Key sales drivers for Lululemon Athletica in 3Q16

Lululemon Athletica (LULU) expects to generate sales ranging between $477 million to $482 million in fiscal 3Q16, up from $419 million in the comparable quarter of fiscal 2015. Consensus Wall Street analyst estimates expect sales to come in at $481.6 million, nearer to the high end of the company’s guidance range.

Sales upside is expected to come in from a combination of new store openings and higher same-store and e-commerce sales. The company had opened 66 new stores in the 12 months ending August 2, 2015.

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US dollar impact

However, Lululemon’s top line is expected to take a hit from the higher US dollar. The company derives about 30% of its sales in other currencies, which is expected to reduce revenue growth in reported terms.

Same-store sales growth

Same-store sales growth (including e-commerce sales) is expected to come in the high single digits, on a constant-currency basis.

  • In 3Q15, total same-store sales growth had come in at 3% on a constant-dollar basis and 1% on a reported basis.
  • In 2Q16, total same-store sales growth had come in at 6% on a constant-dollar basis and 1% on a reported basis.

In contrast, same-store sales growth for Lululemon’s peers in the apparel industry, L Brands (LB), The Gap (GPS), Urban Outfitters (URBN), and Abercrombie & Fitch (ANF) came in at 7%, -2%, 1%, and -1%, respectively, in their last reported quarters. Like LULU, these firms also have sales operations abroad. ANF has recently launched its activewear line—one of several companies to enter into this high-growth segment of the apparel market.

LB, The Gap, Urban Outfitters, and Abercrombie & Fitch together constitute ~4% of the holdings in the SPDR S&P Retail ETF (XRT).

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