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Hype Asset of the Day | September 15th, 2022



Lululemon Athletica Inc. (NASDAQ: LULU)

Lululemon Athletica inc. is a U.S.-Canadian athletic apparel retailer headquartered in British Columbia and incorporated in Delaware. It was founded in 1998 as a retailer of yoga pants and other yoga wear and has expanded to also sell athletic wear, lifestyle apparel, accessories, and personal care products. The company soundly beat analysts' expectations when it released fiscal 2022 second-quarter results (for the quarter ending July 31) on Sept. 1 and has seen an increase in mentions by 104% over the last day. Currently, Lululemon shares trade at $343.43 each.


Positive Hype

There are multiple reasons why Lululemon Athletica Inc. should be on your radar at the moment, some of them are as follows.


  • Since 2018, the company has grown revenue at a 24% CAGR, from $2.65 billion to about $6.25 billion, while increasing earnings EBIT at an even more impressive 29%.


  • Same-store sales jumped 29% through late July, with growth balanced between its U.S. market and international geographies. International sales jumped 35%.


  • Customer traffic was up 30% year over year in Q2, on top of the 150% surge a year ago, while its competitors have been seeing a slowdown in growth.


  • Lululemon generated $391 million in operating profit for a 20.9% margin, compared to 20.6% a year ago.


  • The operating margin expanded by 1.4 percentage points to 21.5%. Earnings per share rose to $2.26 from $1.59 in the prior-year period.


  • Speaking of that footprint, management now forecasts revenue approaching $8 billion in 2022, which would translate into a 26% compound annual growth rate over the last three years.


  • Lululemon achieved its goals of doubling its men's and e-commerce sales and quadrupling its international sales ahead of schedule, and it has set new goals to repeat those feats.


  • Management is guiding revenue to increase around 24% in its fiscal third quarter and for EPS to rise about 34%.


Negative Hype

There are still chances of a demand pullback with market conditions as they are, and another reason for negative hype.


  • Although it was higher than management predicted, the merchandise profit margin fell by 1.6 percentage points due to higher supply chain costs, which seem like they might continue.


Conclusion

Earlier this year, the company announced an ambitious five-year plan to double revenue by 2027 and seems to be sticking to it. With its financials, positive guidance, and growing sales, it seems like Lululemon will continue to do well over the near future and despite rising supply chain costs. Considering the recent drop in price, this would be the perfect time to take a position in Lululemon Athletica.




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