LULU Stock (NASDAQ:LULU)
Lululemon Athletica (NASDAQ:LULU) changed its forecast for the fourth quarter of the fiscal year 2022. Even though the macro environment was unstable, management said that the company’s business was going well and making a lot of money.
The company has seen many people both online and in stores. This is likely good for the bottom line of the company. It is happy with its Power of Three x2 expansion plan.
Because of the positive trends, the company raised its revenue and earnings per share estimates for the fourth quarter of fiscal 2022. For fiscal 2022, earnings per share are expected to be about the same as what was expected before. But the company warned about the gross margin for the fourth quarter of the fiscal year and expected more SG&A leverage.
In fiscal 2022, Lululemon expects its net sales to be between $2.660 billion and $2.700 billion, a 25–27% increase from the previous year. Before, the company said that its net sales would be between $2.605 billion and $2.655 billion, which would be a 22-25% increase from the previous year.
In the fourth quarter of the fiscal year, the company expects adjusted earnings per share of $4.22 to $4.27. This is up from $4.20 to $4.30 before. It thinks the real tax rate will be 28.5% for the fourth quarter of the fiscal year.
The company expects the gross margin to go down by 90–110 basis points (bps) in the fourth quarter of the fiscal year. This is different from what was said before: it would go up by 10–20 bps. However, it expects SG&A expenses to leverage 100-120 bps instead of the 30-50 bps that was said before.
In the last three months, LULU stock has gone up 4.7%, while the industry has gone up 13.5%.
What Does Lululemon’s Future Hold?
Lululemon has taken advantage of both the importance of brick-and-mortar stores and the ease of online shopping. By investing more in e-commerce, it hopes to meet the growing demand for shopping online and give customers a good shopping experience. It has been putting money into building its site, adding omni-transactional functionality, and improving its ability to fulfill orders.
The company keeps improving its omni-channel services, such as curbside pickups, same-day deliveries, and BOPUS (buy online pick up in-store). It is making changes to its mobile app so that customers can pick up their orders at the curb and is training store employees to help customers speed up their transactions. Free digital educator service online for people who can’t go to the company’s stores is another plus.
The company is putting most of its efforts into improving the shopping experience in stores. It uses its physical locations to offer omni-channel services like buying online, pick up in-store, and shipping from the store. Several plans have been put in place to improve the guest experience and cut down on wait times. These include virtual waitlists, mobile point-of-sale systems, and making appointments.
Customers can make returns, exchanges, and buy gift cards without going into the store. This cuts down on time they have to wait in line. The number of stores owned by the company keeps growing.
With its Power of Three 2 growth strategy, Lululemon hopes to increase sales from $6.25 billion in 2021 to $12.5 billion in 2026, doubling the amount. The strategy is based on three key growth drivers: making new products, ensuring customers are happy, and expanding into new markets. The five-year plan is supposed to quadruple sales in international markets and double sales in digital and menswear.
Also, over the next five years, the women’s business and operations in North America are expected to grow at a CAGR in the low double digits, with store channel growth in the mid-teens. The company wants to open stores in Spain and Italy as part of its plan. It also wants to grow in China.
Between 2021 and 2026, total net sales are expected to grow by 15% (CAGR), with the operating margin going up every year. The company thinks its bottom line will grow faster than its top line. Even though the 2026 goals seem too ambitious, the company says they can be reached because they are financially strong. This should help boost LULU stock.
Featured Image: Unsplash @ Marco Tjokro