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CLSA Rated Lululemon Athletica as ‘Underperform’

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Jan. 23 2017, Updated 9:07 a.m. ET

Price movement

Lululemon Athletica (LULU) has a market cap of $9.3 billion. It fell 2.2% to close at $66.99 per share on January 19, 2017. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -3.5%, 0.86%, and 3.1%, respectively, on the same day.

LULU is trading 0.25% below its 20-day moving average, 6.8% above its 50-day moving average, and 0.39% above its 200-day moving average.

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Related ETF and peers

The iShares Edge MSCI USA Quality Factor ETF (QUAL) invests 0.10% of its holdings in Lululemon Athletica. The YTD price movement of QUAL was 0.54% on January 19.

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

  • Nike (NKE) — $86.7 billion
  • Gap (GPS) — $9.7 billion

LULU’s rating

On January 19, 2017, CLSA initiated its coverage of Lululemon Athletica with an “underperform” rating and set the stock’s price target at $73.00 per share.

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Performance in fiscal 3Q16

Lululemon Athletica (LULU) reported fiscal 3Q16 net revenues of $544.4 million—a rise of 13.5% over the $479.7 million reported in fiscal 3Q15. The company’s gross profit margin and operating margin expanded by 420 basis points and 290 basis points, respectively, between fiscal 3Q15 and fiscal 3Q16.

Its net income and EPS (earnings per share) rose to $68.3 million and $0.50, respectively, in fiscal 3Q16, compared with $53.2 million and $0.38 in fiscal 3Q15. It reported adjusted EPS of $0.47 in fiscal 3Q16, a rise of 34.3% from fiscal 3Q15.

Lululemon Athletica’s cash and cash equivalents fell 4.2% and its inventories rose 28.3% between fiscal 3Q16 and fiscal 4Q15.

Projections

Lululemon updated the following projections for 4Q16:

  • net revenues of $775 million–$785 million
  • EPS of $0.99–$1.01
  • tax rate of 31.2%

The company made the following projections for fiscal 2016:

  • net revenues of $2.32 billion–$2.34 billion
  • EPS of $2.18–$2.23
  • tax rate of 28.2%

In the next part, we’ll look at Coca-Cola (KO).

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