Lululemon bucks the weak holiday sales trend and raises guidance

Lululemon Athletica Inc. bucked the weak trend in the retail sector reflected in the first pre-announcements from the holiday season, reporting strong sales and raising its guidance.

The yoga-pants producer said it now expects revenue to range from $1.37 billion to $1.38 billion and earnings per share to range from $2.22 to $2.25. Lululemon’s LULU, -0.40% earlier guidance was for revenue of $1.315 billion to $1.330 billion and EPS of $2.10 to $2.13.

Lululemon stock is up 4.5% for the week to date, and has soared 75.5% over the last year to outperform major benchmarks. The SPDR S&P Retail ETF XRT, +0.46% has gained 5.1% over the past 12 months and the S&P 500 index SPX, -0.02% has rallied 27.5% over the period.

Read: Macy’s comparable sales improved over the holidays but results were still ‘mediocre’

Cowen analysts said strong traffic trends, both in-store and online, are driving strong same-store sales, with women’s, core, men’s and international “all meaningfully contributing.”

“We have confidence that new product, integrated marketing, and online momentum combined with loyalty, a healthy high-end customer demographic, and athleisure fashion trends will yield traffic, improving conversion and comps,” they wrote in a note to clients.

Cowen rates Lululemon stock as outperform with a $270 price target, which it raised from $250.

MKM Partners analysts said Lululemon has set itself apart from rivals after a number of retailers pre-announced their holiday results.

“In what is turning out to be a mixed holiday season for retailers, we view these results as industry leading and reflect the strength of product innovation, technology initiatives, marketing efforts and management execution,” Roxanne Meyer, managing director at MKM, wrote in a note.

MKM rates Lululemon shares a buy and raised its price target to $264 from $258.

Macy’s Inc. M, -0.25% and J.C. Penney Co. Inc. JCP, -4.80% reported holiday season same-store sales declines.

Kohl’s Corp. KSS, +0.54% also reported a decline, with weakness cited in women’s clothing. L Brands Inc. LB, -0.84%saw continued weakness at its Victoria’s Secret brand. And Urban Outfitters Inc. URBN, +1.00% said sales fell at its namesake stores.

Also: Kohl’s Corp. needs more than an Amazon partnership to grow sales

Lululemon, on the other hand, is solidly on a growth path, according to JPMorgan analysts, who said the company has momentum thanks to new and innovative merchandise.

“We estimate today’s guidance raise simply flows-through the updated revenue projection while prudently holding margin outlook the same with our work pointing to product margin upside versus consensus,” analysts led by Matthew Boss wrote in a note.

JPMorgan rates Lululemon stock at overweight.

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