Is a Beat in store?
lululemon Athletica inc. LULU is expected to release its third quarter fiscal 2020 results on December 10, after market close. The yoga-inspired sportswear company likely saw sales growth in the quarter under review. Zacks’ consensus estimate for fiscal third quarter sales is set at $ 1.01 billion, which indicates an increase of 10.4% from the reported figure for the previous year’s quarter.
Zacks’ consensus estimate for the company’s fiscal third quarter earnings is set at 86 cents, suggesting a 10.4% drop from the figure released a year ago. Profit estimates have risen by a dime in the past seven days.
The company posted a surprise profit of 32.1% in the last published quarter. In addition, its net income has exceeded estimates by 5.3%, on average, over the past four quarters.
lululemon Athletica inc. Price and EPS Surprise
lululemon Athletica inc. price-eps-surprise | lululemon Athletica inc. Quote
Key factors to note
lululemon has seen a boost in its e-commerce business since the start of the coronavirus pandemic. Its retail business has benefited from the accelerated expansion of e-commerce offerings and digital sweat. Its products made with technical innovations and high-performance fabrics are expected to have improved performance in the fiscal third quarter due to the increase in working from home and the versatile lifestyle brought on by the pandemic. Additionally, the acquired MIRROR brand likely enhanced the company’s home fitness offerings.
It has invested in websites and mobile apps over the past few quarters to improve the customer experience, which has contributed to the top notch performance. The company’s direct-to-consumer sales through its website and app jumped 155% on a reported basis and 157% in constant dollars in the fiscal second quarter. Growing demand online through its accelerated investments in e-commerce is likely to have helped the company’s revenue in the fiscal third quarter.
When calling last quarter’s earnings, the company predicted that the revenue trend would improve sequentially in the second half of the year. Including the buyout of MIRROR, lululemon expects total revenues to increase from mid to high single digits in the fiscal third quarter and up to low double digits in the fourth quarter. In the digital sector, revenues are expected to remain above pre-COVID 20-30% growth levels.
However, digital sales in the second half of fiscal 2020 are expected to be subdued from the second quarter as the majority of stores operated by the company have reopened.
Additionally, lululemon’s margins were likely affected by rising costs in the third fiscal quarter. When calling last quarter results, management predicted that fiscal third quarter gross profit would decline year over year. In addition, it expects continued deleveraging in selling and administrative expenses in the second half of fiscal 2020, mainly due to investments in certain growth initiatives, particularly in digital, and the keeps store traffic below last year’s levels. In addition, the company expects the buyout of MIRROR to contribute to the deleveraging of SG&A expenses in the third and fourth quarters of the year.
Additionally, lululemon expects adjusted profit to decline in the third quarter before increasing slightly in the final quarter.
Zack model
Our proven model predicts higher profits for lululemon this time around. The combination of a positive earnings ESP and a Zacks # 1 (strong buy), 2 (buy) or 3 (hold) ranking increases the chances of a winning payout. You can discover the best stocks to buy or sell before they are flagged with our ESP Earnings Filter.
lululemon has a Zacks Rank 3 and Earnings ESP of + 2.78%.
Other stocks that could beat earnings estimates
Here are a few other companies that you might want to consider, as our model shows that they too have the right mix of elements to show a profit beat.
DISH Network Corporation DISH currently has + 6.41% ESP revenue and it sports a No.1 Zacks rank. You can see The full list of today’s Zacks # 1 Rank stocks here.
General Mills, Inc. GIS currently has a +1.34% earning ESP and a Zacks # 3 rank.
Constellation Brands Inc. STZ currently has + 2.64% Revenue ESP and Zacks Rank 3.
More information on stocks: it’s bigger than the iPhone!
She could become the mother of all technological revolutions. Apple has only sold one billion iPhones in 10 years, but a new breakthrough is expected to generate over 27 billion devices in just 3 years, creating a market of $ 1.7 trillion.
Zacks has just published a special report that highlights this rapidly emerging phenomenon and 6 tickers to take advantage of it. If you don’t buy now, you could get started in 2021.
Click here for the 6 professions >>
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
DISH Network Corporation (DISH): Free Stock Analysis Report
lululemon Athletica inc. (LULU): Free Stock Analysis Report
Constellation Brands Inc (STZ): Free Stock Analysis Report
General Mills, Inc. (GIS): Free Inventory Analysis Report