Here’s How lululemon (LULU) Looks Just Ahead of Q1 Earnings

lululemon athletica inc. LULU is likely to witness top and bottom-line growth when it reports first-quarter fiscal 2022 results on Jun 2, after market close.

The Zacks Consensus Estimate for fiscal first-quarter sales is pegged at $1.55 billion, indicating a 26.1% increase from the prior-year quarter’s reported figure. The Zacks Consensus Estimate for the company’s fiscal first-quarter earnings is pinned at $1.43, suggesting a 23.3% rise from $1.16 reported in the year-ago quarter. Earnings estimates have been unchanged in the past 30 days.

The company delivered an earnings surprise of 3.1% in the last reported quarter. LULU’s bottom line beat estimates by 20.9%, on average, in the trailing four quarters.

lululemon athletica inc. Price and EPS Surprise

lululemon athletica inc. Price and EPS Surprise

lululemon athletica inc. price-eps-surprise | lululemon athletica inc. Quote

Key Factors to Note

lululemon has been benefiting from a positive response for its products, particularly the athletic and leisurewear brands, along with improved store productivity. Strength across all categories, channels and geographies has been aiding its performance. Management has been capitalizing on the importance of both physical retail and the convenience of online engagement for a while.

A rebound in brick-and-mortar sales, driven by increased store traffic as consumers return to stores, bodes well. lululemon has been leveraging its stores to facilitate omni-channel capabilities, including the buy online pick up in store, and ship from store. Continued investments to enhance the in-store experience are likely to have bolstered sales and earnings in the fiscal first quarter.

lululemon has also been gaining from the improving online demand. Its accelerated e-commerce investments to ensure a robust shopping experience also bode well. It has been investing in developing sites, building transactional omni functionality and increasing fulfillment capabilities.

The company has been strengthening omni-channel capabilities such as curbside pickups, same-day deliveries and BOPUS (buy online pick up in store). It has been enhancing its mobile app in a bid to offer the curbside pickup facility and train its store associates to help customers speed up transactions. Gains from strong e-commerce and omni-channel growth are likely to get reflected in the company’s top-line results for the to-be-reported quarter.

On the last reported quarter’s earnings call, management anticipated net revenues of $1.525-1.550 billion for the first quarter of fiscal 2022, indicating year-over-year growth of 24-26%. Earnings per share (EPS) are projected to be $1.38-$1.43, suggesting a rise from $1.16 earned in the prior-year quarter. Management expects an SG&A leverage of 200-250 basis points year over year for the fiscal first quarter. It anticipated lower digital marketing costs at MIRROR, along with cost efficiencies across the company’s store and e-commerce channels, to aid SG&A.

However, lululemon has been witnessing supply-chain bottlenecks caused by the congestion at ports and a reduced airfreight capacity, which have been resulting in supply delays. The ongoing issues at the ports and trimmed airfreight capacity not only induced delays but also resulted in increased freight costs. These factors are likely to have affected the company’s margins in first-quarter fiscal 2022.

On the last reported quarter’s earnings call, management highlighted that its fiscal first-quarter guidance takes into account the adverse impact of almost 300 bps from air freight costs stemming from port congestions and capacity constraints. Consequently, it expects gross margin to be down 200-250 bps year over year for the fiscal first quarter.

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What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for lululemon this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

lululemon has a Zacks Rank #2 and an Earnings ESP of -0.06%.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season:

Designer Brands DBI currently has an Earnings ESP of +4.35% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports first-quarter fiscal 2022. The Zacks Consensus Estimate for quarterly DBI’s earnings moved up by a penny to 23 cents per share in the past 30 days. The estimate suggests 91.7% growth from the year-ago quarter’s reported number.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Designer Brands’ top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $806.7 million, which suggests a rise of 14.7% from that reported in the prior-year quarter. DBI has delivered an earnings beat of 112.8%, on average, in the trailing four quarters.

The Kroger Co. KR currently has an Earnings ESP of +2.95% and a Zacks Rank of 2. The company is likely to register increases in the top and bottom lines when it reports first-quarter fiscal 2022 results. The Zacks Consensus Estimate for KR’s quarterly earnings moved up 6.7% to $1.27 per share in the past 30 days. It suggests growth of 6.7% from the year-ago quarter’s reported number.

Kroger’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $43.2 billion, which suggests a rise of 4.7% from the figure reported in the prior-year quarter. KR has delivered an earnings beat of 22.1%, on average, in the trailing four quarters.

Fastenal FAST currently has an Earnings ESP of +2.82% and a Zacks Rank #2. FAST is anticipated to register top and bottom-line growth when it reports second-quarter 2022 results. The Zacks Consensus Estimate for FAST’s quarterly revenues is pegged at $1.78 billion, indicating an improvement of 18.3% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for Fastenal’s bottom line has been unchanged in the past 30 days. The consensus estimate of 50 cents per share indicates growth of 19.1% from 42 cents reported in the year-ago quarter. FAST has delivered an earnings beat of 5%, on average, in the trailing four quarters.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Fastenal Company (FAST) : Free Stock Analysis Report The Kroger Co. (KR) : Free Stock Analysis Report lululemon athletica inc. (LULU) : Free Stock Analysis Report Designer Brands Inc. (DBI) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research