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Lululemon Athletica Inc. shares fell 4.4% Thursday after the company reported a third-quarter adjusted earnings miss, but Cowen analysts, and a number of others, are still bullish about the yoga-pant maker.
Lululemon’s LULU, -3.74% adjusted EPS of 75 cents fell below the FactSet consensus for 93 cents. Sales, however, were up 23% to $916.1 million, ahead of the $899 million FactSet outlook.
Despite the EPS result, Cowen still calls the company its “top idea.”
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“Lululemon continues to produce not only a sector best, multi-category product cycle, but also is forming some of the deepest connections with consumers in the entire global athletic, softlines industry through great products and experiences,” wrote analysts led by John Kernan.
Cowen rates Lululemon stock outperform with a $250 price target.
MKM Partners was impressed by the company’s same-store sales result. Lululemon reported a 10% comparable-store sales increase.
MKM Partners analysts say they’re confident the brand can maintain at least a low-single-digit same-store sales growth, with traffic and its multiplatform model driving growth.
“It is a combination of strategic initiatives including an increased number of community events, new brand ambassadors, more frequent customer outreach/improved customer relations management, the co-located store strategy, and weekly product drops that we believe should support ongoing gains in traffic and conversion,” Roxanne Meyer, MKM managing partner, wrote.
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MKM Partners rates Lululemon stock buy with a $258 price target, up $3.
On the earnings call, executives said the bra and outerwear categories were particularly strong ones, along with the men’s category, which grew sales 38% in the quarter.
Lululemon opened a new store in New York City that occupies 23,000 square feet and includes a “flex space” that will showcase product, another in Paris, and one in Oslo. Norway is a new market for the brand.
In China, the company is expanding into “tier 2” cities, with a new location in Hangzhou. The company plans to double the number of stores in the country this year.
And there’s a loyalty program that is only available in four cities: Chicago, Edmonton, Denver and Austin. Buy-online-pickup-in-store is a new capability for the company, but is available in nearly all North American stores. About 20% of customers who use the service make an additional purchase when they get to the store, said Lululemon Chief Executive Calvin McDonald on the call.
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Susquehanna Financial Group analysts led by Sam Poser think Lululemon is peerless in the athletic category.
“Innovative product in core and new categories reflects Lululemon’s commitment to its heritage of performance, comfort and style,” analysts wrote.
“We believe a lack of complacency and the permanently dissatisfied mind-set of management will continue to drive improvements in product, engagement and process, and ultimately, the stock higher.”
Susquehanna rates Lululemon shares positive and lifted its price target to $260 from $222.
Lululemon stock has soared 83.4% in 2019, outpacing the SPDR S&P Retail ETF XRT, +2.06% , which is up 10.4%, and the S&P 500 index SPX, +0.86% , which is up 26% for the period.
