Lululemon athletica inc. (NASDAQ:LULU) is likely to see an increase in both its top and bottom lines when it releases its results for the second quarter of the fiscal year 2022 on September 1, after the market has closed.
The Zacks Consensus Estimate for sales in the fiscal second quarter is set at $1.77 billion, which indicates a 22.1% rise over the reported amount for the same quarter in the preceding year’s fiscal year. According to the Zacks Consensus Estimate, earnings for the company’s fiscal second quarter are expected to come in at $1.86. This represents a 12.7% increase from the $1.65 recorded in the same quarter a year ago. In the past 30 days, there has been no change in the consensus earnings forecast.
In the most recent period that was reported, the company exceeded expectations with its earnings by 3.5%. The bottom line for lululemon exceeded analysts’ expectations by an average of 14.9% in the most recent four quarters.
Higher Traffic Boosted Lululemon Sales
Lululemon has been reaping the benefits of healthy visitation trends in its physical stores and eCommerce platform. It is anticipated that the ongoing trend contributed to an increase in the company’s top line and comparable sales in the quarter that will soon be reported. It has been making the most of both the significance of traditional shopping and the ease of engagement offered by internet platforms.
Lululemon athletica inc. (NASDAQ:LULU) has been utilizing its retail locations to promote omnichannel capabilities, such as buying online picking up in-store, and shipping from store, among other options. Continued efforts to improve the in-store experience have likely contributed to increased sales and earnings for the company in the fiscal second quarter.
Lululemon has also been benefiting from the growing demand for its products to be purchased online. It has increased its efforts in e-commerce to provide customers with a robust shopping experience, which is another positive sign. It has been investing in establishing websites, expanding its transactional Omni-functionality, and enhancing its fulfillment capabilities.
On the earnings call for the most recent quarter, management highlighted that store productivity was higher than the 2019 levels in the first quarter of the fiscal year 2022 and continued to be at similar levels in the second quarter of the fiscal year 2022. This trend continued into the second quarter of the fiscal year 2022. This points to comparable sales increasing further in the second quarter of the fiscal year. The management team projected that the company’s net revenues would be between $1.75 and $1.77 billion for the second quarter of the fiscal year 2022, representing 21-22% growth.
The company anticipates an SG&A spending rate that is reasonably stable for the second fiscal quarter of the year. For the second quarter of the fiscal year, it is anticipated that earnings per share would range from $1.82 to $1.87. The gain of 7 cents per share that is projected to be realized on a real estate sale is not included in the management’s projection for EPS. This gain is expected to be realized in the fiscal second quarter.
Lululemon Faces Challenges Related to Supply Chain
However, Lululemon athletica inc. (NASDAQ:LULU) has been experiencing difficulties throughout the whole supply chain, most significantly concerning the transportation of its items by ocean freight. In a related matter, management has come to place a greater emphasis on the use of air freight. The persistent problems with the supply chain and the reduced capacity of the air freight sector not only caused delays but also led to increasing costs associated with shipping. These considerations certainly affected the company’s gross margin in the second quarter of the fiscal year 2022.
During the earnings call for the most recently completed quarter, management projected that the gross margin for the second quarter of fiscal 2022 would fall by 200 basis points year over year. The impact of air freight expenses due to port congestion and capacity constraints was considered to have amounted to 150 basis points (bps) in the gross margin view.
Featured Image: Megapixl @Michaelvi
