Lululemon’s store productivity returned to its 2019 level in the second quarter, much earlier than the analyst expected. (Photo: 123RF)
What to do with the titles of Lululemon, Empire and Tecsys? Here are some recommendations from analysts likely to move prices in the near future. Note: the author may have a totally different opinion from that expressed.
Lululemon Athletica (LULU, US $ 380.85): Pitfalls Don’t Stop Her From Crossing The Finish Line
Despite some challenges beyond its control related to its supply chain, Lululemon Athletica remains a strong brand that demonstrates one of the best earnings per square foot among retailers, and it should continue on this momentum, believes Bank analyst. of America Securities, Lorraine Hutchinson.
The Vancouver-based company said on Wednesday that its earnings per share in the second quarter of fiscal 2021 significantly exceeded analyst expectations ($ 1.14), reaching US $ 1.65 (US $). Its total sales grew 61% compared to the same period last year, or 25% compared to the previous quarter.
The productivity of its stores is back to its 2019 level – much earlier than the analyst expected – and it even expects it to exceed it altogether in the third quarter.
Lorraine Hutchinson sees a similar scenario with Lululemon Athletics’ in-store operating margins, which rose 26.6% from the second quarter of fiscal 2019.
Lululemon Athletica reported a 4% increase in its online sales compared to the same period last year, a quarter that had posted an impressive growth of 155% in one year, recalls the analyst of Bank of America Securities.
Lorraine Hutchinson anticipates good growth in men’s clothing and internationally (in China in particular) and its smart mirror, which allows users to train at home, despite the shadow cast by her chain. procurement on its results.
In fact, in the second quarter of 2021, the sporting goods retailer’s gross margins climbed 58.1%, or 310 basis points higher than what had been observed in the same period in 2019. Thus, Taking into account the negative effect of the rising cost of air freight transport, Lululemon Athletics maintains its target at an increase of 150 or even 200 basis points compared to last year’s result.
Its production is expected to be further hampered by the pandemic, as the spread of the COVID-19 virus rages in Vietnam, where 20% of its inventory for the second half of the fiscal year will be pulled. It will nevertheless enable it to support the increase in demand observed for its articles. Moreover, if it had not been for the late reopening of its factories in southern Vietnam in mid-September, Lululemon Athletica’s revenue growth would have been much better in the fourth quarter of fiscal 2021, assures the analyst, who nevertheless fixes the increase in its gross margins at 57.8% for 2021.
The sportswear specialist is also reviewing its expectations for the current exercise. Its earnings per share in 2021 are expected to hover between US $ 7.38 and US $ 7.48, and its sales are expected to total US $ 6.2 to 6.3 billion, a figure that would even surpass its target for fiscal 2023. .
This growth is so superior to that of his peers that the Bank of America Securities analyst increased his target price from US $ 410 to US $ 480, revising his enterprise value / earnings before interest, tax ratio upwards. and depreciation at a multiple of 33 times, which was at 31.
Lorraine Hutchinson reiterates her “buy” recommendation as she expects Lululemon Athletica’s performance to be sustainable over time, and to leap further as her supply concerns recede.
Empire Compagny (EMP.A, $ 38.83): pandemic will dampen growth in the short term