Deciphering Lululemon’s (LULU) Stock Prospects Post Q1 Earnings Outperformance

Written By Michael Gary Scott

Lululemon vs. Nike: Weathering Storms in Retail

Amidst the tempest of consumer spending concerns, leading players like Lululemon and Nike have found themselves navigating turbulent waters, with both witnessing a downturn of approximately -8% in the past year. However, Lululemon’s recent triumph in outpacing Q1 revenue forecasts seems to have fortified its standing in the market. As Nike prepares to unveil its financial report later this month, all eyes are on whether it can match Lululemon’s stellar performance.

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A Glance at Q1 Success and Future Projections

Lululemon’s Q1 revenues surged by 10% to $2.2 billion, surpassing estimates marginally. Impressively, Q1 EPS stood at $2.54, marking a 7% beat from projections and an 11% leap from the previous year. Notably, Lululemon has now surpassed earnings expectations for 16 consecutive quarters dating back to September 2020.

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Lululemon anticipates a promising 9%-10% growth in revenue for the second quarter, slightly surpassing the current Zacks Consensus of 8.23% growth. The full-year revenue outlook remains upbeat, with an expected growth rate of 10%-11%.

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Charting the Growth Trajectory: EPS Predictions

Forecasted by Zacks, Lululemon’s annual earnings are poised to ascend by 11% in the current fiscal year to $14.14 per share, up from $12.77 in the prior year. Looking ahead, the FY26 EPS is estimated to spike by another 11% to $15.68.

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Evaluating the Landscape and Investment Potential

Despite lingering apprehensions around consumer spending trends, especially in premium retail segments, Lululemon’s stock maintains a Zacks Rank #3 (Hold). The robust Q1 results have reaffirmed a positive earnings outlook for the brand. Additionally, with LULU currently trading at an attractive P/E valuation of 22.9X, long-term investors could find value at its current price, although strategic investors may be eyeing more opportune moments for entry.

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