Is Lululemon’s Valuation Holding It Back After Earnings Beat?
Although the quarterly numbers were solid, Lululemon stock ultimately fell. This goes to show that even a solid earnings beat can still be trumped by runaway valuations that are hard to justify.
Lululemon Athletica Inc. (NASDAQ: LULU | LULU Price Prediction) released fiscal third-quarter financial results after markets closed Thursday. The company said that it had $1.16 in earnings per share (EPS) and $1.1 billion in revenue, compared with consensus estimates that called for $0.88 in EPS and $1.02 billion in revenue. In the same period last year, the company reported $0.96 in EPS and $916.13 million in revenue.
Management noted that these results demonstrate the strength of Lululemon across channels and markets, both in North America and around the world. Product innovations, investments in the e-commerce business, and the strategic acquisition of Mirror position the firm well to serve guests as their needs evolve across both physical and digital experiences.
Although the numbers were solid for this report, the stock ultimately fell. This goes to show that even a solid earnings beat can still be trumped by runaway valuations that are hard to justify.
Overall, revenues increased 22% year over year and 21% on a constant currency basis. Net revenue increased 19% in North America and increased 45% internationally. Total comparable sales increased by 19%, or 18% on a constant dollar basis.
Direct to consumer net revenue represented 42.8% of total net revenue, compared to 26.9% last year. Direct to consumer revenues increased 94% year over year.
On the books, Lululemon’s cash and cash equivalents totaled $481.58 million, and the capacity under its committed revolving credit facilities was $697.3 million.
Lululemon issued no guidance for the coming quarter, citing uncertainty regarding COVID-19. However, consensus estimates call for $2.41 in EPS and $1.6 billion in revenue for the quarter.
Lululemon stock traded down over 5% at $348.47 on Friday, in a 52-week range of $128.85 to $399.90. The consensus price target is $394.23.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
