Why Lululemon Raised Fiscal 2017 Guidance after 2Q17 Results


Sep. 5 2017, Published 12:20 p.m. ET

LULU’s 2017 top-line guidance revised

After delivering a strong second quarter, Lululemon Athletica’s (LULU) management updated its full-year guidance.

The company now expects total sales to lie in the $2.545 billion–$2.595 billion range, compared to $2.53 billion–$2.58 billion previously suggested. At the mid-point, the revised guidance translates to a 9.6% increase in sales over the previous year. This growth is likely to be based on low-single-digit growth in sales comps and 47 new store openings.

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Fiscal 2017 EPS raised for the second time

The earnings per share outlook was revised upward for the second time during the year. Management now expects $2.35–$2.42 in EPS (excluding the Ivivva restructuring impact),  compared to $2.28–$2.38 guided earlier and the $2.26–$2.36 range guided at the beginning of the year.

The 2Q17 normalized gross margin is projected to increase by 100 basis points, driven mainly by product margin improvements. The company’s strategic initiatives have contributed around 350 basis points of product margin expansion over the last 12 months.

Increased focus on the men’s line

Lululemon is looking to emphasize its focus on menswear and believes this category has $1 billion–plus potential.

“Men’s is still one of our best-kept secrets,” said CEO Laurent Potdevin during the earnings call.

A focus on menswear could turn out to be a good strategy for LULU in a weak athletic wear market. “In successfully pivoting from being a women’s brand to one that now appeals to both genders, Lululemon stands in marked contrast to Under Armour, which has seen only limited success in attracting women,” said Neil Saunders, analyst at GlobalData Retail.

Read more about recent analyst action and Wall Street’s view on LULU in Part 6 of this series. Read on to the next part of this series to learn about the company’s stock market performance and valuations.

ETF investors seeking to add exposure to Lululemon Athletica can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.37% of its portfolio in LULU.


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