Lululemon Athletica (NASDAQ:LULU) delivered better-than-expected second-quarter fiscal 2023 earnings. In addition, the athletic apparel, footwear, and accessories company raised its full-year sales and earnings forecast. While Lululemon’s solid financial performance and upward revision in guidance led a couple of analysts to reiterate their Buy recommendations, the consensus rating indicates that Wall Street analysts are cautiously optimistic about the stock.
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Let’s delve deeper.
Q2 Results in Detail
Lululemon delivered revenue of $2.2 billion, up about 18% year-over-year. The newness of products and innovation led to double-digit growth across women’s, men’s, and accessories categories and supported overall revenues. In addition, Lululemon’s top line surpassed Street’s projection of $2.17 billion.
Higher sales and margin improvement (led by product and freight favourability) drove its Q2 earnings. The company delivered earnings of $2.68 a share, compared to an EPS of $2.20 in the prior-year quarter. Further, earnings came well ahead of the analysts’ forecast of $2.54 per share.
Thanks to the stronger-than-expected Q2 performance and a solid start to the third quarter, Lululemon’s management raised its full-year guidance. The company expects its top line to be in the range of $9.510 billion to $9.570 billion, reflecting a growth of 17% to 18%. Earlier, LULU expected its sales to be $9.440 billion to $9.510 billion in 2023.
Moreover, the company now expects its EPS to be in the range of $12.02 to $12.17, up from its previous outlook of $11.74 to $11.94.
Is LULU a Good Stock to Buy Now?
The ongoing momentum in its business, with solid growth across categories, shows that LULU has managed to navigate the retail industry’s challenges. Following the Q2 results, Goldman Sachs analyst Brooke Roach reiterated a Buy recommendation on the stock. In a note to investors dated August 31, Roach wrote, “This quarter offers another key proofpoint of the brand’s resiliency across categories and geographies, even against a choppy macro backdrop.”
The analyst finds Lululemon’s risk/reward attractive and raised the 12-month price target to $464 from $435.
Echoing similar sentiments, Robert Drbul of Guggenheim maintained a Buy on LULU stock. Drbul increased his Fiscal 2023 and 2024 EPS estimates due to the ongoing momentum in its business. Furthermore, the analyst called Lululemon stock the “favorite growth story in 2023.”
While these analysts are bullish about LULU stock, heightened competition in the athletic apparel industry and macro uncertainty are keeping them cautiously optimistic. Lululemon stock has received 15 Buy, one Hold, and three Sell recommendations for a Moderate Buy consensus rating. Analysts’ average price target of $423.11 implies 10.98% upside potential from current levels.
