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A Look at Lululemon Athletica’s Performance in 2Q16

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Price movement

Lululemon Athletica (LULU) has a market cap of $10.8 billion. It rose by 0.20% to close at $76.66 per share on September 1, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -4.9%, -0.96%, and 46.1%, respectively, on the same day.

LULU is now trading 2.9% below its 20-day moving average, 0.15% below its 50-day moving average, and 19.4% above its 200-day moving average.

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Related ETFs and peers

The iShares Edge MSCI USA Quality Factor ETF (QUAL) invests 0.13% of its holdings in Lululemon Athletica. The ETF tracks an index of US large-cap and mid-cap stocks, selected and weighted by high ROE, stable earnings growth, and low debt-to-equity relative to peers in each sector. The YTD price movement of QUAL was 5.0% on September 1.

The iShares Dow Jones US ETF (IYY) invests 0.04% of its holdings in Lululemon Athletica. The ETF tracks a broad, market-cap-weighted index of US companies covering 95% of the US market.

The market caps of Lululemon Athletica’s competitors are as follows:

  • Nike (NKE): $98.6 billion
  • Gap (GPS): $9.7 billion

Performance of Lululemon Athletica in fiscal 2Q16

Lululemon Athletica reported fiscal 2Q16 net revenues of $514.5 million, which represents a rise of 13.6%, as compared to net revenues of $453 million in fiscal 2Q15. The company’s gross profit margin and income from operations rose by 5.6% and 11.1%, respectively, in fiscal 2Q16 over the prior year period.

Its net income and EPS (earnings per share) rose to $53.6 million and $0.39, respectively, in fiscal 2Q16, as compared to $47.7 million and $0.34, respectively, in fiscal 2Q15. It reported adjusted EPS of $0.38 in fiscal 2Q16, which is a rise of 11.8% over fiscal 2Q15.

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Cash and inventories

LULU’s cash and cash equivalents rose by 6.8%, and its inventories fell by 2.4% in fiscal 2Q16 over fiscal 4Q15. Its current ratio rose to 4.9x, and its debt-to-equity ratio fell to 0.22x in fiscal 2Q16, as compared to a current ratio and a debt-to-equity ratio of 4.1x and 0.28x, respectively, in fiscal 4Q15. During fiscal 2Q16, the company repurchased 0.2 million shares of its common stock at an average price of $63.65 per share.

Projections

Lululemon has made the following projections for 3Q16:

  • net revenue in the range of $535 million–$545 million (based on total comparable sales in the mid-single digits, on a constant dollar basis)
  • EPS in the range of $0.42–$0.44
  • 137.5 million outstanding weighted average shares
  • tax rate of 30.5%

The company has made the following projections for fiscal 2016:

  • net revenue in the range of $2.32 billion–$2.35 billion based on total comparable sales in mid-single digits on a constant dollar basis
  • EPS in the range of $2.11–$2.19 (or $2.07–$2.15, when normalized for tax and interest adjustments made during fiscal 1Q16 and 2Q16)
  • 137.5 million outstanding weighted average shares
  • a tax rate of 28.7%

For an ongoing analysis of this sector, visit Market Realist’s Consumer Discretionary page.

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