Deutsche Bank Gives 'First Take' on Lululemon's (LULU) Q2
Deutsche Bank commented on Lululemon Athletica Inc. (NASDAQ: LULU) after the company reported Q2 results an updated guidance. Analyst Dave Weiner called combined comps "impressive" and pointed out items of interest for today's 9 am call.
"lulu put up impressive total combined comps (cc) of +11%, coming in at/above the high-end of market expectations. Importantly, this included a store comp acceleration to +6%, after negative trends in five of the past six quarters. In addition, initial 3Q comp plan of +HSD meets the bar, in our view. All those things said, the initial focus of the call will be on two items we believe, gross margin and 3Q EPS plan," said Weiner.
"Regarding gross margin, y/y trends were down by -370bp versus consensus of -200bp (and inventories were up meaningfully by +55% y/y). So, investors will look for management to discuss whether pressure is coming more from promotions/discounts and increased competition, or more from ‘transient’ factors such as air freight, FX, or other types of expenses related to the supply chain, etc. Relatedly, 3Q EPS is being set meaningfully below consensus (implied OM -400bp y/y, we believe), so the market will need comfort on QTD 3Q trends and strong 4Q potential as well," added the analyst.
Deutsche Bank has a Hold rating on Lululemon Athletica Inc. (NASDAQ: LULU) with a price target of $70.00
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Shares of Lululemon Athletica Inc. closed at $64.05 yesterday.