15:04 LULU Lululemon Athletica Q1 Earnings Preview (32.63 +0.64) -Update-
LULU is expected to report Q1 after the market closes followed by conference call at 4:30pm ET... LULU Consensus: First Call consensus is Q1 EPS of $0.12 on revs of $71.78 mln; Q2 EPS of $0.15 on revs of $87.51 mln; FY09 EPS of $0.74 on revs of $401.09 mln; FY10 EPS of $1.02 on revs of $535.12 mln... Guidance: After reporting last qtr on 4/2, co issued in-line FY09 guidance, sees EPS of $0.72-0.74, excluding $0.02 charge resulting from the co's planned closure of its four stores currently operating in Japan, vs. $0.74 consensus. The guidance is based on anticipated comparable store sales growth of low teens; or high single digits on a constant dollar basis, and 35 planned new store openings in North America.... Expectations: Since becoming publicly traded, co has never missed earnings estimates (only reported 3 other times) and revs growth has remained above 80% YoY. Gross margin will be key issue with the high promotional activity in the retail sector (gross margin estimates for Q1 of 52.31% and FY09 of 54.04%). As seen by its relatively high valuation, the co is still recognized as a compelling growth story. Stifel believes lululemon has the potential to become a 300-store chain in North America, nearly four times 2007's ended store count of 81 stores, as it expands into malls, lifestyle centers, and street locations... Although the co has unique niche targeting both yoga enthusiasts and environment friendly persons, the pricey clothing co may come under pressure if consumers turn to cutting their athletic-wear discretionary spending and opt to buy more reasonably priced pieces (for ~half the cost) from competitors such as NKE or UA... Briefing note: Short interest is 29% (up from ~20% last qtr), mkt cap is $2.25 bln and float is 46.73 mln... Co has forward P/E of 45 (for comparison, some competitors' forward P/E values: UA 29 and NKE 19)... Note LULU's implied volatility is elevated heading into its earning release. The percentage difference in implied volatility vs historical volatility is +80%, which gives an idea of current volatility expectations vs past (actual) stock movement. The Jan09 40 puts were also seeing interest on Friday with 2250 contracts trading vs. open int of 460, pushing implied vol up around 6 points. The implied one day change is ~5%...Areas of Focus on the Call: 1) FY09 outlook (may refer to as FY08) 2) Gross and operating margin (gross margin estimates for Q1 of 52.31% and FY09 of 54.04%) 3) Inventory update (co has been focused on improving its supply chain to help with inventory levels) 4) Update on international growth (plan on entering Europe in 2009; last qtr announced it is discontinuing its operations in Japan, which was <1.5% of revs)... Secondary plays: NKE, UA, DKS, HIBB... |
