How LULU performed in 2017?
Despite heated competition, yoga-inspired athletic apparel retailer Lululemon Athletica (LULU) delivered strong results in 2017. It recorded trailing-12-month sales of $2.5 billion, up 11% YoY (year-over-year). In comparison, Nike (NKE), Columbia Sportswear (COLM), and Under Armour (UAA) reported TTM sales growth of 3.6%, 2.1%, and 4.8%. Skechers (SKX) also posted strong numbers. Its TTM top-line growth was even better, at 12.4%.
Lululemon’s robust sales comps drove its topline growth. Comps improved 8% in the last reported quarter, driven by double-digit increases in digital traffic. The company expects to see continued momentum and has projected a high-single-digit rate increase in sales comps during the next quarter.
LULU has strong margins
LULU has not only seen solid top-line growth, but the company has also been able to convert this growth into healthy margins. As you can see from the chart below, the company has best-in-class margins. Its TTM gross margin stands at 52% of sales—better than Nike (44%), Under Armour (45%), Skechers (46%), and Columbia Sportswear (47%).
How Wall Street views LULU
Lululemon recently raised its earnings guidance, saying it recorded some of the best traffic and sales numbers on Black Friday and Cyber Monday. The guidance lift was well received by Wall Street, resulting in analysts lifting the company’s price target.
Discussing LULU’s long-term outlook, Oliver Chen of Cowen & Co. said, “Longer-term, we believe omnichannel inventory management strategy, personalized CRM efforts, consistent innovation in pants fabrication, & opportunities for improvement in tops and accessories can drive momentum through FY18,”
Lululemon is covered by 33 Wall Street analysts and rated a 2.3 on a scale of 1 (“strong buy”) to 5 (“sell”). It’s recommended as a “buy” by 55% of analysts, a “hold” by 42%, and a “sell” by 3%.
The company was downgraded by Citibank to “neutral” on January 2. Analyst Paul Lejuez said, “Although Lululemon is one of the more attractive square footage growth stories in softlines retail, we believe expectations are high and the risk reward is balanced.”
Read the next part of this series for an overview of Skecher’s 2017 performance.