Slowdown in Comps Hits lululemon's (LULU) Q4 Results, Outlook; FBR Affirms at 'Underperform'
FBR & Co. affirms lululemon athletica (Nasdaq: LULU) at Underperform following Q4 results and outlook issued earlier Wednesday.
Analyst Susan Anderson noted the following points today ahead of the company's quarterly conference call:
- 4Q results. 4Q adjusted EPS of $0.85 reflected (1) comps of +11% (vs. FBR/street of +7.5%/+8.1%); (2) SG&A de-leverage of .135 bps, vs. FBR/consensus of .45 bps/.135 bps; (3) GM contraction of .113 bps, vs. FBR/consensus of .275 bps/.217 bps and implied guidance of ~.250 bps to .150 bps.
- 1Q/2016 guidance. 1Q EPS were guided to $0.28.$0.30, vs. FBR/consensus of $0.37; 1Q comps were guided to +MSD, vs. FBR/consensus of +5.0%/+6.8%. Adjusted EPS for 2016 were guided to $2.05.$2.15, vs. FBR/consensus of $2.06/$2.16. 2016 comps were guided to +MSD, vs. FBR/guidance of +3.4%/+5.8%, and dollar sales were guided to $2.285B.$2.335B.
- Share buybacks. During 4Q, LULU repurchased 2.1 million shares at an average cost of $49.52/share, adding one penny to 4Q15 EPS.
- Inventory remains elevated. The 4Q-end inventories increased 36%, vs. 4Q revenue growth of 17%, and appear elevated relative to sales trends. Inventory levels have come down as we expected as LULU cycles higher inventory from LY and likely given the significant clearance sales in 4Q15 (two in-store clearance events and two warehouse sales) that helped to bring it down.
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