Lululemon Undercuts Key Levels With Earnings On Tap

Women’s activewear retailer Lululemon (LULU) will report second-quarter earnings late Wednesday, as pandemic uncertainty rattles consumers again at a time when industry watchers were expecting a full economic rebound over the summer. LULU stock fell.


Lululemon Earnings

Estimates: Analysts polled by FactSet expect Lululemon earnings per share to jump 60% year over year to $1.19. Sales are seen surging 48% to $1.33 billion. At-home fitness system Mirror is expected to account for $52 million of sales. Lululemon bought the startup in 2020 for $500 million.

Results: Check back later.

Outlook: Check back later.

Lululemon’s digital sales have been a key driver of revenue growth during the pandemic. The company posted a 55% hike in e-commerce in Q1 vs. the same period the year before. Online sales accounted for 44% of total sales in the last quarter. With stores reopening, online sales are seen slowing to 40% of total sales in Q2.

Still, that’s impressive considering rival Nike‘s (NKE) digital sales accounted for just 35% of total sales in its most recent quarter.

Lululemon is also making a push to expand internationally. International sales surged 125% in Q1.

“I can see a time in the near future where our international business grows in size to be equal to our North America business,” CEO Calvin McDonald said in a call with investors following the company’s Q1 earnings report.

Meanwhile, Lululemon Like New resale program launched in May in California and Texas. Look for management to update on its traction, as the program aims to reach new customers at a lower price point. It’s also an initiative to reduce textile waste.

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LULU Stock

Shares fell 1.2% to 381.76 on the stock market today, working on the sixth straight decline. LULU stock fell below its 50-day moving average on Sept. 2, according to MarketSmith chart analysis. Investors may have been spooked by a report that the company’s gross profits sank 25% and sales slumped 23% for fiscal 2021 in Ireland, amid growing Covid concerns in Europe.

More broadly, apparel makers and retailers have been pulling back in the past few weeks, including Nike stock and Under Armour (UAA). That could reflect growing concerns about rising Covid cases.

LULU stock had a good run earlier this summer. It broke out past a 371.10 buy point from a cup-with-handle base on a July 6 daily chart. On July 22, Lululemon stock cleared a 386 buy point from a weekly chart. Shares ultimately hit a record 417.85 intraday on Aug. 30.

LULU stock is now below the 386 buy point from the weekly chart but still in buy range from the 371.10 daily entry. But it’s safer to wait for the reaction to tonight’s Lululemon earnings report.

Lululemon’s relative strength line took a dive earlier this month and is trending down. LULU stock has an RS Rating of 69 out of a possible 99, while its EPS Rating is 96.

Nike stock was down 1.2%. Shares undercut their 50-day line late last week after a strong post-earnings run from the end of June. UAA stock sank 2.1%, testing its 50-day line.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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