Jefferies Previews lululemon's (LULU) Q2, Boosts PT 30%; Sees Another Strong Quarter, But Conservative Outlook
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Price: $121.07 +4.65%
Rating Summary:
13 Buy, 34 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
13 Buy, 34 Hold, 4 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Jefferies lifted its price target on lululemon athletica (Nasdaq: LULU) just over 30 percent, from $43 to $56, but maintained its Hold rating on the stock.
Previewing lulu's second-quarter 2011, Jefferies is looking for another strong quarter. Jefferies currently sees lululemon reporting earnings of 22 cents per share, in-line with management's 21 to 22 cents guidance, and the Street's 22 cents outlook. Jefferies gives a nod to resolved inventory issues on the call.
Commenting, Jefferies said, "we are forecasting a 20 percent constant-currency SSS, an acceleration from the +16% in 1Q11. FX continues to benefit results (+3% impact) with the USD depreciation vs. the CAD. E-commerce growth is also likely to improve with the platform transition completed. Operating margins should again expand in 2Q11 with strong sell-through, FX, and leverage more than offsetting the onset of cost inflation. The story here is pretty straightforward and highly leveraged to SSS upside, which should continue given the strength and momentum in the brand."
Amid the strong quarter, Jefferies thinks lululemon's outlook might be a bit conservative, saying its "existing FY11 EPS guidance of $1.05-1.08 implies [gross margin percentage] contraction in 2H from more normalized markdowns and 225-250 bps of [gross margin percentage] headwinds coming from inflation. This language is similar to a year ago (see 1Q10 transcript) when management expected GM% moderation but ultimately far exceeded their plan." One wildcard is lululemon's comparable-store expectations, which may provide some upside if its strong.
No earnings adjustments have been made by Jefferies.
Click here for more analyst color, or here for a ratings history.
Lululemon shares are trading 4.5 percent lower early Tuesday. Earnings for lululemon are expected out Friday, September 9th, ahead of the bell.
Previewing lulu's second-quarter 2011, Jefferies is looking for another strong quarter. Jefferies currently sees lululemon reporting earnings of 22 cents per share, in-line with management's 21 to 22 cents guidance, and the Street's 22 cents outlook. Jefferies gives a nod to resolved inventory issues on the call.
Commenting, Jefferies said, "we are forecasting a 20 percent constant-currency SSS, an acceleration from the +16% in 1Q11. FX continues to benefit results (+3% impact) with the USD depreciation vs. the CAD. E-commerce growth is also likely to improve with the platform transition completed. Operating margins should again expand in 2Q11 with strong sell-through, FX, and leverage more than offsetting the onset of cost inflation. The story here is pretty straightforward and highly leveraged to SSS upside, which should continue given the strength and momentum in the brand."
Amid the strong quarter, Jefferies thinks lululemon's outlook might be a bit conservative, saying its "existing FY11 EPS guidance of $1.05-1.08 implies [gross margin percentage] contraction in 2H from more normalized markdowns and 225-250 bps of [gross margin percentage] headwinds coming from inflation. This language is similar to a year ago (see 1Q10 transcript) when management expected GM% moderation but ultimately far exceeded their plan." One wildcard is lululemon's comparable-store expectations, which may provide some upside if its strong.
No earnings adjustments have been made by Jefferies.
Click here for more analyst color, or here for a ratings history.
Lululemon shares are trading 4.5 percent lower early Tuesday. Earnings for lululemon are expected out Friday, September 9th, ahead of the bell.
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