Lululemon (LULU) is trading up 6% at a new all-time high after the company reported another strong quarter and raised guidance for the year, even though that guidance was below some elevated expectations.
First quarter comparable store sales grew 14%, above 11.5% estimates, or 16% excluding foreign exchange (FX) impacts versus guidance for a low double-digit increase.
Breaking down sales further, in-store comps grew 8% ex-FX while direct to consumer comps grew 35% ex-FX. North America sales grew 18% with high single-digit traffic growth in an environment where retailers are struggling mightily while international sales grew 39%, led by 70% growth in China. This sixth consecutive double-digit comp is extremely impressive, especially considering it comes on top of a difficult 19% comp in the first quarter of last year.
EPS grew 35% to $0.74 versus $0.68-0.70 guidance as gross margin expanded 80 bps to 53.9%. Guidance for the second quarter was in-line/toward the low end of expectations, but Chief Executive Calvin McDonald "continues to see strong momentum across the entire business."
One can assume that the second quarter outlook is conservative, given the company's recent performance.
The healthy lifestyle-inspired athletic apparel company raised EPS and revenue guidance for fiscal 2020, though not enough to match analysts' estimates, which were modestly higher than the prior outlook. The company reaffirmed its outlook for low double-digit comparable store sales excluding FX. Again, one can assume that some conservatism is baked into the outlook, so investors have not lost focus on the big picture.
Lululemon continues to breathe fire and perform like a best of breed retailer.
With a $23 bln valuation, the stock trades at ~23x EV/EBITDA, which is a slight premium to NIKE (NKE), on par with French luxury brand Hermes (HESAY), and a modest discount to Under Armour (UAA). The stock seems to deserve the premium multiple based on continued strong execution.