NEW YORK (TheStreet) -- Lululemon Athletica (LULU - Get Report) shares spiked after first falling into the red on Thursday when the yoga pants and athletic apparel company issued a disappointing outlook.
Lululemon forecast fiscal first-quarter revenue in the range of $413 million to $418 million with comparable sales "in the low single digits," below consensus expectations. The outlook was issued as part of Lululemon's recent quarterly results. Earnings for the first quarter are expected to range between 31 cents to 33 cents a share, Lululemon said, which is lower than the 39 cents analysts were expecting.
For fiscal 2015, Lululemon said earnings will be between $1.85 a share and $1.90 a share, while analysts forecast $2.07 for the year, according to Thomson Reuters.
The company beat earnings and revenue expectations for the fourth quarter. Net income rose slightly to $110.9 million, or 78 cents a share, compared to $109.7 million, or 75 cents a share, in the year-earlier quarter. Revenue rose 16% from a year earlier to $602.5 million. Comparable store sales rose 8% in the quarter on a constant dollar basis, Lululemon said.
Lululemon shares were trading 7.2% higher to $65.34 on Thursday. Here's what analysts said.
Paul Lejuez, Wells Fargo (Outperform; $66-$70 valuation range)
Overall, Q4 was slightly better than what the company guided to in January, and while guidance for a low single digit comp increase in Q1 is a little light, we believe it is likely impacted by port delays/inventory issues (as annual comp guidance is for a mid-single digit comp increase). Considering this is the first guidance issued with new CFO Stuart Haselden in the role, we also believe there is some conservativism built in. We continue to believe that the strength in the athletic category creates a tailwind for LULU and others for years to come. With LULU's results improving even before the company has fully fixed the product, we expect comp momentum to continue.
LULU is one of the most attractive growth stories in retail, in our view, helped by the tailwind in athletic apparel. We believe LULU is one of the nicer houses in a great neighborhood, which should help the company drive strong top and bottom-line growth over the coming years. With the last couple of quarters displaying increasing consistency, we believe the long-term story is appealing.
Sam Poser, Sterne Agee (Neutral; NA PT)
EPS of $0.78 was above expectations driven by less-than-anticipated deleverage of SG&A. The FY15 guidance is well below both SALI and FC estimates. 1Q15 FX neutral guidance calls for +LSD SSS is a material deceleration from 4Q14 SSS of +8%, and FY15 guidance calls for +MSD FX neutral SSS. We question the status of the turnaround, and or the impact of the West Coast port slowdown. We wonder why management expects SSS acceleration after 1Q. 2015 will be another investment year, which has resulted in the EPS guidance of $1.85-$1.90 as compared to the $2.07 consensus estimate. We remain in a wait-and-see mode.
Oliver Chen, Cannacord Genuity (Outperform; $70 PT)
LULU's +8% comp (vs Str +6%) solid & inc. +20% DTC, in-line w/our view on improving differentiated product, elevated fashion & broader men's assortment. Guide light given implied 2-yr stack comp (inc. DTC) of +2-4% & incorporates 2H improvement given 1Q +LSD vs. FY +MSD.
Mgmt guided 1Q comps +LSD vs. +1% in 1Q14 (& vs. Street +6.1% & Cowen +9%), implying a 2-yr stack of +2-4%, representing a slowdown on a 2-yr stack vs. the +12% 2-year LULU just printed on 4Q. We are encouraged with the +8% comp in 4Q & our fundamental thesis regarding product improvement remains intact. However, we are concerned as to why business is expected to slow in 1Q given the seeming recent momentum and we wait for further clarity on the call to deem guidance as conservative. We also note store comps were +5% in 4Q vs. -3% in 3Q, & given the historical contribution from DTC (+6% in 3Q, +3% in 4Q), a +LSD comp could include a negative store comp. Mgmt guided 1Q EPS to be in the range of $0.31 to $0.33 vs. Street at $0.39 & Cowen $0.44.
TheStreet Ratings team rates LULULEMON ATHLETICA INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate LULULEMON ATHLETICA INC (LULU) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 13.6%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- LULU has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.36, which clearly demonstrates the ability to cover short-term cash needs.
- Compared to its closing price of one year ago, LULU's share price has jumped by 28.21%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- Net operating cash flow has significantly increased by 79.50% to $42.86 million when compared to the same quarter last year. In addition, LULULEMON ATHLETICA INC has also vastly surpassed the industry average cash flow growth rate of -39.72%.
- The gross profit margin for LULULEMON ATHLETICA INC is rather high; currently it is at 54.05%. Regardless of LULU's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, LULU's net profit margin of 14.41% compares favorably to the industry average.
- You can view the full analysis from the report here: LULU Ratings Report