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Category: Stock Market and Lululemon
Date: 12 June 2020 Stock Price: $308.12 We take a look at the 1st quarter earnings for their 2020 fiscal year of Lululemon a sports apparel company with their 1st quarter 2020 sales topping $651 million. The company's revenues declined by almost 17% for the quarter compared to the same quarter of the previous year.
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About Lululemon
lululemon athletica inc. (NASDAQ:LULU) is a healthy lifestyle inspired athletic apparel company for yoga, running, training, and most other sweaty pursuits, creating transformational products and experiences which enable people to live a life they love. Setting the bar in technical fabrics and functional designs, lululemon works with yogis and athletes in local communities for continuous research and product feedback. A few quick facts about Lululemon
Read more about Lululemon here
- Lululemon is listed on the Nasdaq under share code ticker: LULU
- Lululemon has 491 company operated retail outlets
- Lululemon employs roughly 19 000 people
Read more about Lululemon here
Overview of Lululemon's 1st quarter 2020 earnings report
The data below refers to the latest quarter's data unless specified otherwise
- Net sales: $651.926 million (down from $782.315 million from the same quarter of the previous year)
- Lululemon's net sales decrease by -16.7% over the last 12 months
- Cost of goods sold : $317.560 million (down from $360.595 million for the same quarter of the previous year)
- Cost of goods sold decreased by -11.9% over the last 12 months.
- Some margin squeezed being experienced by Lululemon as revenue declined at a faster rate than their cost of sales for the 1st quarter of their 2020 fiscal year
- Net income: $28.632 million (down from $93.603 million for the same quarter of the previous year)
- Diluted earnings per share: $0.22 (down from $0.74 for the same quarter of the previous year)
- PE ratio: 350 (based on the earnings per share for the current quarter being reported for full fiscal year)
- Diluted weighted-average shares outstanding: 130.251 million (down from 130.694 million for the same quarter of the previous year)
- Cash and cash equivalents: $823.006 million
- Cash and cash equivalents per share: $6.32
- Cash and cash equivalents makes up 2.00% of Lululemon's current market capital
- Cash and cash equivalents makes up 25.7% of Lululemon's total assets
- Inventories: $625.849 million (up from $443.006 million for the same quarter of the previous year)
- Inventories makes up 19.5% of Lululemons total assets
- Inventories grew by 41.3% over the last year
- It is concerning to see Lululemons inventories build up so strongly with the value of their inventories increased by over 40% over the last 12 months
- Total stockholders' equity of Lululemon's: $1.835 billion
- Shareholders' equity per share: $14.1
- Lululemon is trading at 21.8 times ist stockholders equity which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- Firms in the S&P500 have an average price to book value of 3.7
Lululemon's management commentary on their 1st quarter 2020 earnings report
VANCOUVER, British Columbia--(BUSINESS WIRE)--Jun. 11, 2020-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the first quarter of fiscal 2020.
As a result of the COVID-19 pandemic, all of the Company's stores in North America, Europe, and certain countries in Asia Pacific were closed for a significant portion of the quarter. Subsequent to May 3, 2020, the Company began reopening its retail locations in these markets in line with the guidance from local authorities. As of June 10, 2020, 295 of its company-operated stores were open.
As a result of the COVID-19 pandemic, all of the Company's stores in North America, Europe, and certain countries in Asia Pacific were closed for a significant portion of the quarter. Subsequent to May 3, 2020, the Company began reopening its retail locations in these markets in line with the guidance from local authorities. As of June 10, 2020, 295 of its company-operated stores were open.
Calvin McDonald, Chief Executive Officer commented: "I'm proud of how lululemon has navigated these unexpected and unprecedented times. We are learning more every day about our guests -- how they enjoy interacting with us online and what makes them comfortable as stores reopen." McDonald continued: "Our strong digital business demonstrates the strength of our guest connection and the long-term opportunity to create further Omni experiences going forward."
COVID-19 Pandemic
The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. The spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as malls and lifestyle centers. Government authorities in certain markets in which the Company operates have also issued orders that require the closure of non-essential businesses and people to remain at home.
The Company has taken actions to close retail locations and to reduce operating hours, and it continues to monitor the situation and work closely with local authorities to prioritize the safety of its people and guests. In February 2020, the Company temporarily closed all of it retail locations in Mainland China. All of these locations have since reopened. In March 2020, it temporarily closed all of its retail locations in North America, Europe, and certain countries in Asia Pacific. Subsequent to May 3, 2020, the Company began reopening its retail locations in these markets in line with the guidance from local authorities. As of June 10, 2020, 295 of its company-operated stores were open.
The Company's retail locations and distribution centers are operating with precautionary measures in place such as reduced operating hours, physical distancing, enhanced cleaning and sanitation, and maximum occupancy levels. The Company remains confident in the long-term growth opportunities and its Power of Three growth plan and believes that it has sufficient cash and cash equivalents, and available capacity under its revolving credit facilities, to meet its liquidity needs. As of May 3, 2020, the Company had cash and cash equivalents of $823.0 million and the capacity under its committed revolving credit facility was $398.2 million.
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the globe, and the rapid and continuous developments, the Company is not providing detailed financial guidance for fiscal 2020 at this time.
COVID-19 Pandemic
The outbreak of a novel strain of coronavirus ("COVID-19") was declared a global pandemic by the World Health Organization in March 2020. The spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus, especially when congregating in heavily populated areas, such as malls and lifestyle centers. Government authorities in certain markets in which the Company operates have also issued orders that require the closure of non-essential businesses and people to remain at home.
The Company has taken actions to close retail locations and to reduce operating hours, and it continues to monitor the situation and work closely with local authorities to prioritize the safety of its people and guests. In February 2020, the Company temporarily closed all of it retail locations in Mainland China. All of these locations have since reopened. In March 2020, it temporarily closed all of its retail locations in North America, Europe, and certain countries in Asia Pacific. Subsequent to May 3, 2020, the Company began reopening its retail locations in these markets in line with the guidance from local authorities. As of June 10, 2020, 295 of its company-operated stores were open.
The Company's retail locations and distribution centers are operating with precautionary measures in place such as reduced operating hours, physical distancing, enhanced cleaning and sanitation, and maximum occupancy levels. The Company remains confident in the long-term growth opportunities and its Power of Three growth plan and believes that it has sufficient cash and cash equivalents, and available capacity under its revolving credit facilities, to meet its liquidity needs. As of May 3, 2020, the Company had cash and cash equivalents of $823.0 million and the capacity under its committed revolving credit facility was $398.2 million.
Fiscal 2020 Outlook
Due to the impact that COVID-19 is having across the globe, and the rapid and continuous developments, the Company is not providing detailed financial guidance for fiscal 2020 at this time.
Lululemon (NASDAQ: LULU) stock price history
The image below shows the stock price history of Lululemon for the last 5 years, and its been a very very good time for Lululemon stockholders. 5 years ago the stock was trading at $66.50 and its currently trading at $308.12 That's a whopping 363.4% return over the last 5 years. No stockholder will ever say no to those kind of returns.
The stock of Lululemon is trading at a lost closer to its 52 week high of $3244.76 than it is to its 52 week low of $128.84 which to us is a clear indication that the short term sentiment and momentum of Lululemon stock is very positive at this point in time.
The stock of Lululemon is trading at a lost closer to its 52 week high of $3244.76 than it is to its 52 week low of $128.84 which to us is a clear indication that the short term sentiment and momentum of Lululemon stock is very positive at this point in time.
Lululemon (LULU) stock vs Under Armor (UAA) stock
The image below shows the stock price performance of Lululemon (LULU) and Under Armor (UAA) over the last 3 years. Both these firms operate in the sporting apparel and goods sector. From the image below it is clear that the stock of Lululemon has easily outperformed that of Under Armor. Over the three year period Lululemon provided a return of 459.81% while the stock of Under Armor is declined by -56.6% over the same period of time. So only one winner in this stock comparison
Recent coverage of Lululemon
The extract below covers the latest regarding Lululemon as obtained from TheStreet.com (10 June 2020)
What to do with a name like Lululemon Athletica (LULU) . I have written about this company on multiple occasions. I have traded it more often than I have written on it. The trades, owing to nothing other than this being a good stock in a bull market, were profitable. I think every time. I take no credit. I just rode the wave. Except this time. You'll recall that as planet earth burned back in February, and well into March, that I was quite open about the need to narrow portfolios going into a deep contraction in economic activity. LULU did not make that cut. Not a shot at LULU, a lot of good firms did not make that cut. It was not until early April when I felt that technically, a change in trend had been confirmed, and quite honestly, I was methodical in putting the risk back on. As a result of this lack of aggression, LULU is the one (one of the ones) that got away. Q1 earnings are due tomorrow (Thursday) after the closing bell. The shares have moved well beyond the February highs. Short question. Is there still some money to be made here. Let you know when it hits the P/L, but sure, we can give this a go. Let's open the door to see what we can see.
Thursday Afternoon
Wall Street consensus for what Lululemon Athletica reports tomorrow night is for EPS of $0.23. Fact is though that 32 analysts cover this name and that consensus is really more like an average. As far as I can tell, the high projection across the group is for EPS of $0.55, while the lowest is down around -$0.15. The broader view for revenue generation is for roughly $683 million, but again, there is at least one analyst all the way up at $811 million, and another way down at $552 million. I other words... at least these guys aren't copying each other's work.
That average revenue number, if realized, would represent an outright contraction in sales year over year of -12.6%. This would break a streak of eight consecutive quarters of 20% growth or more. Acceptable for a business that largely sells apparel in the age of Covid-19, while gyms everywhere have been closed for months? I think so, if temporary.
Brian Nagel, a very highly rated analyst (Oppenheimer) whose work I respect, admits that valuation at these levels may be a bit stretched, but also feels that the firm is positioned well for an economy coming out of a public health crisis. Nagel has an outperform rating on LULU and has now increased his price target to $370. He's not alone. A number of analysts have opined ahead of these earnings. Some of them are also highly rated. This one caught my eye. On Tuesday, just yesterday. If you've read me for a while, then you know that my ears perk up when I hear something, anything from Morgan Stanley's Kimberly Greenberger. She maintained her "hold" rating on LULU going into the numbers, with a price target of $296. That's down about $30 from the last sale. Hmm, what's a guy trying to make a couple of bucks, who does like the name and the business, to do?
Read the original article here
What to do with a name like Lululemon Athletica (LULU) . I have written about this company on multiple occasions. I have traded it more often than I have written on it. The trades, owing to nothing other than this being a good stock in a bull market, were profitable. I think every time. I take no credit. I just rode the wave. Except this time. You'll recall that as planet earth burned back in February, and well into March, that I was quite open about the need to narrow portfolios going into a deep contraction in economic activity. LULU did not make that cut. Not a shot at LULU, a lot of good firms did not make that cut. It was not until early April when I felt that technically, a change in trend had been confirmed, and quite honestly, I was methodical in putting the risk back on. As a result of this lack of aggression, LULU is the one (one of the ones) that got away. Q1 earnings are due tomorrow (Thursday) after the closing bell. The shares have moved well beyond the February highs. Short question. Is there still some money to be made here. Let you know when it hits the P/L, but sure, we can give this a go. Let's open the door to see what we can see.
Thursday Afternoon
Wall Street consensus for what Lululemon Athletica reports tomorrow night is for EPS of $0.23. Fact is though that 32 analysts cover this name and that consensus is really more like an average. As far as I can tell, the high projection across the group is for EPS of $0.55, while the lowest is down around -$0.15. The broader view for revenue generation is for roughly $683 million, but again, there is at least one analyst all the way up at $811 million, and another way down at $552 million. I other words... at least these guys aren't copying each other's work.
That average revenue number, if realized, would represent an outright contraction in sales year over year of -12.6%. This would break a streak of eight consecutive quarters of 20% growth or more. Acceptable for a business that largely sells apparel in the age of Covid-19, while gyms everywhere have been closed for months? I think so, if temporary.
Brian Nagel, a very highly rated analyst (Oppenheimer) whose work I respect, admits that valuation at these levels may be a bit stretched, but also feels that the firm is positioned well for an economy coming out of a public health crisis. Nagel has an outperform rating on LULU and has now increased his price target to $370. He's not alone. A number of analysts have opined ahead of these earnings. Some of them are also highly rated. This one caught my eye. On Tuesday, just yesterday. If you've read me for a while, then you know that my ears perk up when I hear something, anything from Morgan Stanley's Kimberly Greenberger. She maintained her "hold" rating on LULU going into the numbers, with a price target of $296. That's down about $30 from the last sale. Hmm, what's a guy trying to make a couple of bucks, who does like the name and the business, to do?
Read the original article here
Lululemon (NASDAQ: LULU) latest stock valuation
Based on Lululemon's 1st quarter 2020 earnings report from Lululemon what do we value their stock at? Based on Lululemon's earnings reported our valuation model provides a target price (full value price) of $148.10 a Lululemon stock (down slightly from our 4th quarter 2019 earnings report valuation of Lululemon).
We therefore believe that the stock of Lululemon is overvalued. We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $148.10. A good entry point into Lululemon would therefore be at $133.30 or below. Since the stock of Lululemon is trading at well above our target price we rate the stock of Lululemon as avoid.
We expect it to pull back strongly from current levels to levels closer to our target price in coming weeks and months.
We therefore believe that the stock of Lululemon is overvalued. We usually recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price which in this case is $148.10. A good entry point into Lululemon would therefore be at $133.30 or below. Since the stock of Lululemon is trading at well above our target price we rate the stock of Lululemon as avoid.
We expect it to pull back strongly from current levels to levels closer to our target price in coming weeks and months.
Next earnings release of Lululemon
It is expected that Lululemon will release their 2nd quarter 2020 earnings report in early September 2020