by Ian Harvey
Lululemon Athletica inc. (NASDAQ:LULU) reported earnings on Thursday August 31, 2017 after the market closed. The report was for the fiscal Quarter ending Jul 2017.
** OPTION TRADE: Buy the LULU SEPT 15 2017 60.000 CALL at approximately $3.00. Place a pre-determined sell at $6.00.
Note: No protective stop losses added
-- but if you wish to do so make it $1.20.
Lululemon reported an undoubtedly solid quarter. Net revenue of $581 million increased 13% year-over-year, beating consensus estimates by $13 million and coming ahead of guidance for $565 million-$570 million. Adjusted EPS of 39 cents were up a penny year-over-year, and beat the consensus by 4 cents.
Comparable-store sales, which include direct-to-consumer, rose 7% year-over-year, thanks mostly to a 29% increase in DTC sales. That strength is welcome, as it shows the company’s ability to manage declining in-store traffic.
Gross margin — another key figure — rose 180 basis points YOY. Lululemon is driving its revenue through demand, not through promotions or clearance. Adjusted operating margin did decline by 160 bps, however, as higher expenses offset the improvement in cost of sales. But those expenses should moderate over time as Lululemon is able to pull back on investing in the business.
Lululemon did have a big online sale, which helped DTC revenue. But that aside, direct sales still rose 15%, and the increase in gross margin shows that overall LULU did a nice job managing pricing.
"Our performance reflects the growing global consumer response to Lululemon's unique position as the leading brand that defines an active, mindful lifestyle," Laurent Potdevin, Lululemon CEO, said in a statement Thursday afternoon. "The acceleration that we have seen across the business in the second quarter enables us to take another positive step on our path towards achieving $4 billion in revenue by 2020," he added.
There’s a lot that supports the bull case for LULU stock.
Following the release of the earnings results, shares of Lululemon -- which closed Thursday's regular trading session down 0.1% -- spiked in after-hours trading, at one point by as much as 8%. The stock is currently trading for a 5.6% gain in after-market trading. On a year-to-date basis, the stock is down 11.5%.
Action to Take…..
Take profit as soon as possible!