lululemon athletica (LULU 157.71, +20.71, +15.1%) captures fresh all-time highs on Friday after the company handily beat market expectations in its second quarter report last night while also giving some solid guidance for the third quarter and upping its guidance for fiscal 2018.
Simply put, investors got what they wanted – and more – in a blowout second quarter beat which saw LULU report earnings per share (EPS) of $0.71 on revenue growth of nearly 25% to $723.5 million.
What’s more, total comparable sales increased 20%, or increased 19% on a constant dollar basis, easily outperforming Street expectations. Comparable store sales increased 10%, or increased 10% on a constant dollar basis. Further, inventories at the end of Q2 were up 24% to $392.7 million.
The +10% store comps were helped by a high-single digit lift in traffic while traffic. Additionally, traffic at the company’s e-commerce site grew more than 20%.
Gross margin also beat Street expectations, up 360 basis points compared to last year to 54.8%. Gross margin increased 320 basis points compared to adjusted gross margin for the second quarter of fiscal 2017.
Management highlighted the importance of the solid Q2 performance, offering that the results mark another important step in the journey toward the company’s 2020 goals. Specifically, lululemon management noted that the company is now tracking to meet or even exceed its $4 billion revenue goal with men's and e-commerce effectively ahead of schedule.
Turning to the outlook, lululemon expects net revenue for Q3 to be in the range of $720-730 million based on a total comparable sales increase in the low teens on a constant dollar basis, and diluted EPS is expected between $0.65-0.67. Also, the company anticipates gross margin to increase by approximately 100 basis points versus Q3 of last year.
For the full fiscal 2018 then lululemon now expects net revenue to be in the range of $3.185-3.235 billion, vs prior $3.04-3.08 billion expectation, based on a total comparable sales increase in the low teens on a constant dollar basis. Further, diluted EPS is expected between $3.45-3.53 for the full year, up from the previous $3.10-3.18 expectation. Lastly, the company now expects gross margin for the year to expand 100 to 150 basis points, primarily driven by the continued product margin improvement and leverage on occupancy and other fixed costs.
Shares of LULU skip to all-time highs on Friday, doubling their value YTD. The stock has enjoyed unchallenged gains in the face of impressive quarterly beats and solid comp performances these past few quarters. The risk is that, were the beats to cease, the stock could see a myriad of selling – but for now, investors are sitting on a gold mine which seems to be getting even richer in its first public report since Calvin McDonald took the reins from ousted Laurent Potdevin, who resigned in November 2017.