Why Lululemon Earnings Are Zen

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When Lululemon Athletica Inc. (NASDAQ: LULU) reported its most recent quarterly results after the markets closed on Wednesday, the company said that it had $0.56 in earnings per share (EPS) and $619 million in revenue. That compared with consensus estimates of $0.52 in EPS and revenue of $611.5 million. The fiscal third quarter of last year reportedly had EPS of $0.50 and $544.4 million in revenue.

During the quarter, total comparable sales increased 8%, or increased 7% on a constant dollar basis. This was comprised of comparable store sales increasing 2% and direct to consumer net revenue increasing 26%.

At the same time, gross margin was 52.2%, increasing from 51.1% in the fiscal third quarter.

In terms of the fourth quarter outlook, the company expects to see EPS in the range of $1.19 to $1.22 and net revenues between $870 million and $885 million. The consensus estimates call for $1.18 in EPS and $866.82 million in revenue.

On the books, Lululemon cash and cash equivalents totaled $650.1 million at the end of the quarter, down from $734.8 million at the end of the previous fiscal year.

Lululemon CEO Laurent Potdevin commented:

Our teams powerfully delivered robust results across both store and digital channels this quarter, driving a further acceleration in our business. The strength of our Q3 earnings supports our unique position as the global brand defining an active, mindful lifestyle.

Also:

As we start the holiday season, I’m energized by our momentum and we are increasing guidance to reflect this performance. I’m grateful for the enthusiasm I see every day across our collective as we remain on our path to delivering $4 billion in revenue in 2020.

Shares of Lululemon closed Wednesday at $67.66, with a consensus analyst price target of $66.50 and a 52-week trading range of $47.26 to $72.70. Following the announcement, the stock was up about 9% at $73.90 in early trading indications Thursday.