Key Takeaways
- Lululemon’s Q2 financial results are scheduled for Thursday following market closure
- Analyst consensus points to earnings per share of $1.80 with revenue reaching $2.46B, representing approximately 1.6% contraction from last year
- Shares have plummeted 42% since January, currently hovering near $118.07 against a median Wall Street target of $127.35
- Goldman Sachs downgraded its price objective from $122 to $111 while maintaining a Neutral stance
- Multiple indicators including credit card spending patterns, foot traffic metrics, and consumer confidence deteriorated throughout the period
Athletic apparel retailer Lululemon (LULU) will unveil its second-quarter earnings results Thursday evening. Analysts have outlined several key factors to monitor.
Lululemon Athletica Inc., LULU
The consensus from financial analysts projects earnings per share at $1.80 alongside quarterly revenue of $2.46B. These figures would signal a year-over-year revenue contraction of approximately 1.6%, marking a dramatic shift from the 6.5% expansion the company achieved during the comparable quarter last year.
Shares are presently changing hands near $118.07, reflecting a steep decline of almost 42% year-to-date. This performance stands in stark contrast to the S&P 500 index, which has climbed roughly 11.5% during the identical timeframe.
The consensus price objective from analysts stands at $127.35, suggesting modest potential appreciation from current levels. However, the prevailing mood among market watchers remains decidedly cautious ahead of the announcement.
Investment bank Goldman Sachs maintains a Neutral recommendation on shares and recently lowered its price objective to $111 from a previous $122. The firm highlighted deteriorating credit card transaction data, falling consumer confidence readings, and weaker store traffic patterns throughout the quarter.
Goldman’s research also emphasized that net purchase intention metrics and net promoter scores continued their descent in July, remaining significantly beneath competitive benchmarks. This trend persists despite management’s efforts to enhance product offerings and marketing campaigns.
The Quant rating system from Seeking Alpha assigns LULU a Sell rating. Meanwhile, both Seeking Alpha’s analyst community and the broader Wall Street consensus generally recommend holding the stock.
One Seeking Alpha contributor observed that profitability and additional financial indicators are weakening, even while revenue growth maintains a positive trajectory. International operations are compensating for some weakness, though Americas-based revenue continues declining.
Management’s Prior Outlook Established Expectations
Lululemon provided second-quarter projections during its first-quarter earnings release. Management forecast revenue between $2.45B and $2.475B, indicating a 2% to 3% year-over-year decrease. The company’s earnings per share guidance ranged from $1.76 to $1.81.
This forward-looking statement encompassed the consensus forecast, which explains the relative stability in analyst projections. Throughout the past month, estimates have experienced minimal adjustment.
The company has fallen short of Wall Street’s revenue projections on multiple occasions during the previous two years. Earnings per share performance has proven more reliable, with the retailer exceeding consensus estimates in every instance across the most recent four quarters. Revenue surprises occurred 75% of the time.
Competitor Results Present Varied Picture
Several apparel industry competitors have already disclosed their results, providing relevant context. Abercrombie and Fitch delivered 4.8% revenue expansion, surpassing projections by 1.8%, prompting shares to surge 33.8% following the announcement.
Gap disclosed a 2% revenue contraction, falling short of estimates by 0.9%, although shares nevertheless advanced 12.9%.
LULU has lagged behind both competitors during the past month, declining 4.5% while the broader apparel sector dropped an average of 3.5%.
Looking at the trailing three-month period, earnings per share and revenue projections for LULU have received zero upward adjustments, contrasted with 21 downward modifications.
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