Lululemon (LULU) First Quarter Earnings Report Preview: What to Watch For

Sportswear retailer Lululemon ( NASDAQ:LULU ) will report earnings tomorrow afternoon. Here’s what to look for.

Lululemon met analysts’ revenue expectations last quarter, reporting revenue of $3.21 billion, up 15.6% year-over-year. It was a mixed quarter for the company, with full-year revenue forecasts falling short of analyst expectations. Lululemon, on the other hand, slightly beat analyst expectations for revenue and EPS in the quarter. The company’s growth was driven by 12% same-store sales growth, with U.S. store sales increasing 7% and international store sales increasing 44% on a constant currency basis.

Does purchasing Lululemon affect your earnings? Read our full analysis here, it’s free.

Analysts expect Lululemon’s revenue to grow 9.8% year-over-year to $2.20 billion this quarter, a slowdown from the 24% growth reported in the same quarter last year. Adjusted earnings per share are expected to be $2.40.

Most analysts covering the company have reaffirmed their estimates over the last 30 days, suggesting they expect the company to remain on track towards earnings. Lululemon has a history of beating Wall Street expectations, beating revenue estimates over the past two years by an average of 2.7% each time.

Looking at Lululemon’s competitors in the retail apparel segment, some of them have already released first-quarter results, which gives us a hint of what to expect. Gap reported year-over-year revenue growth of 3.4%, beating analyst expectations by 3.1%, and Abercrombie and Fitch reported revenue growth of 22.1%, beating estimates of 5.8%. After the results, Gap shares rose 29.3%, and Abercrombie and Fitch also rose 17.1%.

Read our full analysis of Gap’s results here and Abercrombie and Fitch’s results here.

There is positive sentiment among investors in the fashion retail segment, with share prices up an average of 11.5% over the past month. Lululemon is down 12.9% over the same period and is heading toward earnings, with an average analyst price target of $424.8 (versus the current share price of $305).

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