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Category: Stock Market and Lululemon (LULU)
Date: 11 September 2020 Stock Price of Lululemon: $320 We take a look at the 2nd quarter earnings for their 2020 fiscal year of Lululemon a sports apparel company with their 2nd quarter 2020 sales topping $900 million. Net sales increased by 2.2% for the quarter compared to the same quarter of the previous year and they reported net earnings of $ million for the 2nd quarter of 2020.
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- Calvin McDonald, Chief Executive Officer commented: We're pleased with our overall business results for the second quarter, as lululemon increasingly lives into its Omni potential. "
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 506 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: $902.942 million (down from $883.352 million from the same quarter of the previous year)
- Lululemon's net sales increase by 2.2% over the last 12 months
- Cost of goods sold : $413.441 million (up from $397.556 million for the same quarter of the previous year)
- Cost of goods sold increased by 3.9% over the last 12 months.
- Some margin squeezed being experienced by Lululemon as revenues increased at a slower rate than their cost of sales for the 2nd quarter of their 2020 fiscal year
- Net income: $86.880 million (down from $124.990 million for the same quarter of the previous year)
- Diluted earnings per share: $0.66 (down from $0.96 for the same quarter of the previous year)
- PE ratio: 121
- Diluted weighted-average shares outstanding: 130.799 million (up from 130.783 million for the same quarter of the previous year)
- Cash and cash equivalents: $522.998 million
- Cash and cash equivalents per share: $3.99
- Cash and cash equivalents makes up 1.24% of Lululemon's current market capital
- Cash and cash equivalents makes up 14.9% of Lululemon's total assets
- Cash and cash equivalents per share: $3.99
- Inventories: $672.773 million (up from $518.513 million for the same quarter of the previous year)
- Inventories makes up 19.3% of Lululemons total assets
- Inventories grew by 29.8% over the last year
- It is concerning to see Lululemons inventories build up so strongly with the value of their inventories increased by almost 30% over the last 12 months
- Total stockholders' equity of Lululemon's: $2.001 billion
- Shareholders' equity per share: $15.29
- Lululemon is trading at 20.9 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 2nd quarter 2020 earnings report
VANCOUVER, British Columbia--(BUSINESS WIRE)--Sep. 8, 2020-- lululemon athletica inc. (NASDAQ:LULU) today announced financial results for the second 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 temporarily closed during the first quarter of fiscal 2020. The Company began reopening its retail locations in these markets during the second quarter of fiscal 2020. As of August 2, 2020, 492 of its 506 company-operated stores were open.
For the second quarter ended August 2, 2020:
For the second quarter ended August 2, 2020:
- Net revenue was $902.9 million, an increase of 2% compared to the second quarter of fiscal 2019. On a constant dollar basis, net revenue increased 3%.
- Company-operated stores net revenue was $287.2 million, a decrease of 51% compared to the second quarter of fiscal 2019.
- Direct to consumer net revenue was $554.3 million, an increase of 155% compared to the second quarter of fiscal 2019. On constant dollar basis, direct to consumer net revenue increased 157%.
- Direct to consumer net revenue represented 61.4% of total net revenue compared to 24.6% for the second quarter of fiscal 2019.
- Gross profit was $489.5 million, an increase of 1% compared to the second quarter of fiscal 2019.
- Gross margin was 54.2%, a decrease of 80 basis points compared to the second quarter of fiscal 2019.
- Income from operations was $124.4 million, a decrease of 26% compared to the second quarter of fiscal 2019. Adjusted income from operations decreased by 19% to $135.9 million.
- Operating margin was 13.8%, a decrease of 520 basis points compared to the second quarter of fiscal 2019. Adjusted operating margin was 15.0%, a decrease of 400 basis points.
- Income tax expense was $37.3 million compared to $44.8 million in the second quarter of fiscal 2019 and the effective tax rate was 30.0% compared to 26.4% for the second quarter of fiscal 2019. The adjusted effective tax rate was 28.9% for the second quarter of fiscal 2020.
- Diluted earnings per share were $0.66 compared to $0.96 in the second quarter of fiscal 2019. Adjusted diluted earnings per share were $0.74 for the second quarter of fiscal 2020.
The Company ended the second quarter of fiscal 2020 with $523.0 million in cash and cash equivalents and the capacity under its committed revolving credit facilities was $697.7 million. The Company had $623.7 million in cash and cash equivalents at the end of the second quarter of fiscal 2019. Inventories at the end of the second quarter of fiscal 2020 increased 36% to $672.8 million compared to $494.3 million at the end of the second quarter of fiscal 2019. The Company ended the quarter with 506 stores.
Calvin McDonald, CEO of lululemon stated: "We're pleased with our overall business results for the second quarter, as lululemon increasingly lives into its Omni potential. As trends around the world are shifting to working and sweating from home with an increased focus on health and wellness, we believe 2020 is likely an inflection point for retail and for lululemon." McDonald continued: "We are cautiously optimistic with regard to the second half of the year as we continue to navigate the uncertain environment."
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.
Calvin McDonald, CEO of lululemon stated: "We're pleased with our overall business results for the second quarter, as lululemon increasingly lives into its Omni potential. As trends around the world are shifting to working and sweating from home with an increased focus on health and wellness, we believe 2020 is likely an inflection point for retail and for lululemon." McDonald continued: "We are cautiously optimistic with regard to the second half of the year as we continue to navigate the uncertain environment."
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 $54.10 and its currently trading at $320. That's a whopping 491% 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 $399.90 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 $399.90 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) vs Under Armor (UAA) vs Nike (NKE) over the last 3 years
The image below shows the stock price performance of Lululemon (LULU), Under Armour (UAA) and Nike (NKE) over the last 3 years. The clear laggard in this picture is the stock of Under Armour which has really been struggling while the stock of Lululemon and Nike has been rallying. Over the last 3 years the three stocks provided the following returns:
- Lululemon (LULU):
- Nike (NKE):
- Under Armour (UAA):
Recent coverage of Lululemon (LULU)
The extract below covers the latest regarding Lululemon as obtained from Nasdaq.com
When the market is dropping as sharply as it was at the beginning of this week, my first instinct is always to look for things to buy. The obvious stocks to look for are those that get caught up in the selling, even though the long-term story that has supported them remains intact. Lululemon Athletica (LULU) would be a good example right now.
It seems that LULU is being viewed as an example of the 2020 version of “irrational exuberance,” but that isn’t an accurate assessment. Yes, the stock is coming off an all-time high, and P/Es that were nudging 100 before the recent pullback certainly made it look, on the surface at least, like it was hugely overvalued. However, unlike with some things in this market, that was all completely justified in Lululemon’s case.
This company is undergoing a major change, one that most analysts, by dint of being adults, seem to be missing. Lululemon is usually thought of as a company that caters primarily to yoga enthusiasts. It has roots in that activity, for sure, but it now goes way beyond downward dog poses. Most analysts acknowledge that, by referring to them more generally as an athletic apparel company, or by the more convenient word, “athleisure,” to describe their product line.
Even that, though, is missing the point. I was, for a while, a high school debate coach, so I am all too aware that the plural of anecdote is not data, but when investing, it often pays to look around you and see what people are buying. On that basis, Lululemon has a lot more growth to come.
I have a teenage son who I will be taking off to his freshman year of college this weekend. He is, for good or bad, a preppy kind of kid, and over the last ten years or so, that has meant frequent visits to Vineyard Vines stores and outlets. This year, when shopping for clothes to take to college, the first stop was not Vineyard Vines but the local Lululemon store. I was surprised when we entered to see that the men’s section of the store was at least as big as and probably bigger than the women’s.
Read the full article here
When the market is dropping as sharply as it was at the beginning of this week, my first instinct is always to look for things to buy. The obvious stocks to look for are those that get caught up in the selling, even though the long-term story that has supported them remains intact. Lululemon Athletica (LULU) would be a good example right now.
It seems that LULU is being viewed as an example of the 2020 version of “irrational exuberance,” but that isn’t an accurate assessment. Yes, the stock is coming off an all-time high, and P/Es that were nudging 100 before the recent pullback certainly made it look, on the surface at least, like it was hugely overvalued. However, unlike with some things in this market, that was all completely justified in Lululemon’s case.
This company is undergoing a major change, one that most analysts, by dint of being adults, seem to be missing. Lululemon is usually thought of as a company that caters primarily to yoga enthusiasts. It has roots in that activity, for sure, but it now goes way beyond downward dog poses. Most analysts acknowledge that, by referring to them more generally as an athletic apparel company, or by the more convenient word, “athleisure,” to describe their product line.
Even that, though, is missing the point. I was, for a while, a high school debate coach, so I am all too aware that the plural of anecdote is not data, but when investing, it often pays to look around you and see what people are buying. On that basis, Lululemon has a lot more growth to come.
I have a teenage son who I will be taking off to his freshman year of college this weekend. He is, for good or bad, a preppy kind of kid, and over the last ten years or so, that has meant frequent visits to Vineyard Vines stores and outlets. This year, when shopping for clothes to take to college, the first stop was not Vineyard Vines but the local Lululemon store. I was surprised when we entered to see that the men’s section of the store was at least as big as and probably bigger than the women’s.
Read the full article here
Lululemon (NASDAQ: LULU) latest stock valuation
Based on Lululemon's 2nd 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 $162.60 a Lululemon stock (up slightly from our 1st quarter 2020 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 $162.60. A good entry point into Lululemon would therefore be at $146.40 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 $162.60. A good entry point into Lululemon would therefore be at $146.40 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 3rd quarter 2020 earnings report in early December 2020