By Senad Karaahmetovic
Shares of Lululemon (NASDAQ:LULU) are up nearly 2% in premarket trading after the apparel retailer raised its net revenue forecast, topping the consensus estimates.
LULU reported Q1 EPS of $1.48, ahead of the year-ago period, and beating the analyst consensus of $1.43 per share. Net revenue came in at $1.6 billion, up 33% YoY and above the consensus projection of $1.54 billion. The company reported $1.28 billion in inventory, up 32% QoQ and more than the expected $1.01 billion.
The retailer expects Q2 adjusted EPS in the range of $1.82 to $1.87, ahead of the analyst estimates of $1.75. It forecasts Q2 revenue in the range of $1.750 billion to $1.775 billion. LULU expects net revenue in the range of $1.75 billion to $1.78 billion, while analysts were looking for $1.72 billion.
For the full-fiscal 2023, Lululemon expects adjusted EPS in the range of $9.35 to $9.50, compared to the estimated $9.36 per share. The company anticipates an FY 2023 net revenue in the range of $7.61 billion to $7.71 billion, up from the previous forecast of $7.49 billion to $7.62 billion, while analysts were expecting $7.58 billion.
"Our teams continue to deliver strong financial performance while navigating the ongoing impacts of COVID-19, supply chain disruptions and inflationary pressures. While we are not immune to these challenges, our omni operating model, balanced growth strategy, and unique approach toward innovation enable the positive results we are reporting today and anticipate for the full year," CFO Meghan Frank said.
UBS analyst Jay Sole lowered the price target on Neutral-rated LULU shares to $365.00 per share from $430.00.
“We forecast LULU delivering 21% sales and 24% EPS 5-yr. CAGRs. We expect the stock to grind higher as earnings increase. But, we don’t see opportunity for significant P/E expansion as we think the stock's FY2 27x P/E accounts for this growth. Plus, while we have increased conviction in a more robust sales outlook, we think more meaningful EPS upside is limited given macro headwinds and ongoing supply chain challenges. Without a catalyst to drive P/E expansion, we doubt the stock will be a big outperformer,” Sole said in a client note.
Morgan Stanley analyst Kimberly Greenberger is much more positive.
LULU’s “results speak for themselves,” the analyst told clients in a note.
“LULU beat 1Q expectations & is one of few Softlines retailers to raise FY guidance despite macro/supply chain volatility, reaffirming its position as one of the best growth assets in our space. And the new guide conservatively embeds deceleration,” Greenberger added.