Why Lululemon Athletica Expects Stronger Sales in Fiscal 4Q16
Lululemon Athletica (LULU) raises its fourth-quarter revenue guidance
Growth company Lululemon Athletica (LULU) has revised its fourth quarter (fiscal 4Q16) and full-year (fiscal 2016) revenue guidance upwards due to better-than-expected performance in the 2015 holiday season.
In fiscal 4Q16, LULU expects to generate sales (XLY)(FXD) between $690 million and $695 million, up from the $670 million–$685 million it had anticipated. That revision would imply sales growth of between 14.5% and 15.4% year-over-year in the fourth quarter.
In fiscal 2016, LULU expects to generate sales of between $2.045 billion and $2.05 billion, up from its earlier forecast of $2.025 billion–$2.04 billion. The revised guidance implies sales growth of 13.8% to 14.1%, compared to fiscal 2015.
Consensus Wall Street analyst estimates project revenue of ~$692 million for Lululemon in fiscal 4Q16, up a projected 14.8% over fiscal 4Q15.
How is the competition doing?
Apparel revenue growth for activewear companies was mostly robust during the critical holiday quarter. Adidas (ADDYY) reported apparel sales growth of 12% in 4Q15[1. 8% in currency-neutral terms], with particular strength in soccer, Adidas Neo, training, and Adidas Originals. Originals continue to see robust excitement around the Yeezy Boost collection.
The number-one and -two sports apparel brands in the United States, Nike (NKE) and Under Armour (UA), have continued their strong records in performance apparel. While UA grew apparel sales 22.2% in 4Q15, Nike’s apparel sales grew 8% in fiscal 3Q16.[2. Market share stats: Matt Powell, The NPD Group]
Outlook and analysis
Topline growth expectations for Lululemon are robust in the fourth quarter. The retailer (XRT)(RTH) opened 52 stores around the world in the first three quarters of the fiscal year, including 41 in the United States—the company’s largest market. The premium apparel retailer was expected to open another ten stores in the fourth quarter. Plus, the company’s newly redesigned pants wall display, combined with higher-than-average growth expectations from its menswear and Ivivva businesses, should continue to provide traction to the top line.
We’ll analyze same-store sales growth expectations for LULU and their drivers in the next part of this series.