Lululemon’s growth expectations
Wall Street has projected 15.5% growth in Lululemon Athletica’s (LULU) 4Q17 top line. LULU’s total sales increased ~11% YoY (year-over-year) during the first nine months of 2017 to $1.7 billion. The company beat consensus expectations in the first three quarters of the year.
What has driven Lululemon’s top line so far in 2017?
Lululemon had a slow start to the year, as the company recorded a 1% decline in same-store sales during the first quarter of 2017. A drop in store traffic along with weakness in online sales drove down 1Q17 comps. Nevertheless, LULU’s top line expanded 5% YoY as square footage grew 10% YoY during the quarter.
The company, however, bounced back in the second quarter as sales comps grew 7%. Its top line jumped 13% YoY driven by the strong comps and an 11% increase in square footage. The company’s e-commerce comps were particularly strong and recorded 30% growth. The company’s performance in the third quarter was even more impressive as total sales grew 13.7% YoY driven by an 8% increase in comps and a 12% square footage rise.
What to expect in 4Q?
Management is optimistic about the fourth quarter results, following a healthy holiday season. The company expects total sales to lie in the $905 million to $915 million range, reflecting 15% growth at the midpoint. High-single-digit growth (on a constant dollar basis) in comps is likely to drive total sales. Whether the company can meet the consensus expectations and exceed its guidance remains to be seen.
ETF investors seeking to add exposure to LULU can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.4% of its portfolio in LULU.
In the next article, we’ll discuss LULU’s year-to-date profitability.