Lululemon Athletica Stock Outpaces Competitors
Lululemon Athletica, the prominent athletic wear retailer, has been soaring ahead of its competitors, and analysts are optimistic about the company's second-quarter earnings report.
Strong Expectations for Earnings
Lululemon (ticker: LULU) is anticipated to either meet or surpass analyst estimates for the quarter. According to FactSet, adjusted earnings of $2.54 per share on $2.17 billion in revenue are expected. Additionally, same-store sales are predicted to rise by 12.1%.
Standing Out in a Challenging Market
While other companies in the athletic wear sector have struggled during earnings season, Lululemon's performance could buck the trend. Both Dick's Sporting Goods (DKS) and Foot Locker (FL) experienced significant drops in their stock after weak reports. However, industry analysts believe that Lululemon may have a different outcome.
Wedbush analyst Tom Nikic remarked in a note on Wednesday that, despite the challenging macro environment, high momentum brands like Lululemon have managed to excel.
Stay tuned for Lululemon Athletica's earnings report, which will be released after the market closes on Thursday.
Lululemon's Strong Performance Continues
Piper Sandler analyst Abbie Zvejnieks believes that Lululemon's recent product launches and back-to-school shopping have helped drive an increase in store visits. In fact, Lululemon's foot traffic in the U.S. experienced double-digit growth each month during the third quarter, surpassing other companies in the sportswear and sporting goods sector, according to data from Placer.ai. Furthermore, the company's efforts to tailor its products to local markets could result in positive sales performance in China.
The company's high-income consumer base is also expected to contribute to its success. Similar retailers, such as Abercrombie & Fitch (ANF) and Urban Outfitters (URBN), have experienced consistent spending from this demographic, even as other consumers tighten their purse strings.
However, some experts caution that the market's heightened expectations for Lululemon's upcoming report may temporarily put pressure on the stock price. To truly drive the stock higher, the company will need to deliver a standout quarter and raise guidance. Despite this uncertainty, Lululemon shares have already seen significant gains this year, outperforming the SPDR S&P Retail ETF, which has risen by 6.4%.
Citi analyst Paul Lejuez aptly stated, "This is a crowded long amongst hedge funds and expectations are high, which may limit upside in the very near term."
Elevated Potential for Corporate Growth
As the company continues to demonstrate strong performance, analyst Lejuez maintains a Buy rating on the shares and suggests that there is a possibility of an improved fiscal-year guidance in the current quarter.
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