Will Lululemon (LULU) Miss this Earnings Season? - Analyst Blog


Lululemon Athletica Inc. ( LULU ), a leading yoga-inspired athletic apparel and accessories retailer, is slated to report its fourth-quarter and fiscal 2013 results on March 27, 2014. In the last quarter, it posted a positive surprise of 9.8%. Let's see how things are shaping up for this announcement.

Factors this Past Quarter

Lululemon posted better-than-expected third-quarter fiscal 2013 earnings despite the supply chain issues faced at the beginning of the third quarter. Moreover, quarterly earnings reflected double-digit growth rate. Revenue growth in the quarter was primarily driven by store openings, an upside in comparable-store sales and an increase in Direct-to-Consumer revenues. Despite the positive third quarter results, the company lowered its fourth-quarter and fiscal 2013 outlook due to the persistent supply chain issues that resulted in a soft start to the fourth quarter, overall weak traffic trends and the projection of the weaker Canadian dollar.

Moreover, the company further slashed its guidance in January due to a sharp fall in customer traffic and sales trends since the start of January. Nevertheless, the company is encouraged to see that the investments to strengthen and enhance its back-end product operations structure are starting to pay off. While the company believes that the full realization of these benefits is still a long way, it continues to stringently focus on the successful execution of its long-term strategic plans.

Earnings Whispers?

Our proven model does not conclusively show that Lululemon is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.

Positive Zacks ESP: Lululemon currently has an Earnings ESP of +1.39%. This is because the Most Accurate estimate stands at 73 cents per share, while the Zacks Consensus Estimate is pegged at 72 cents.

Zacks Rank #4 (Sell): Lululemon's Zacks Rank #4 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks that Warrant a Look

Here are some other companies you may want to consider as our model shows they have the right combination of elements:

G-III Apparel Group Ltd. ( GIII ) has an Earnings ESP of +4.26% and a Zacks Rank #2 (Buy).

CarMax Inc. ( KMX ) has an Earnings ESP of +1.89% and a Zacks Rank #2 (Buy).

Zep Inc. ( ZEP ) has an Earnings ESP of +11.11% and a Zacks Rank #3 (Hold).

G-III APPAREL (GIII): Free Stock Analysis Report

CARMAX GP (CC) (KMX): Free Stock Analysis Report

LULULEMON ATHLT (LULU): Free Stock Analysis Report

ZEP INC (ZEP): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: GIII , KMX , LULU , ZEP



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