Lululemon Thrives While Other Brands Struggle, Delivering Solid Q2 Earnings: Time to Buy LULU?

Lululemon (LULU) seems to be unphased by the broader economic climate, as the athleisure company delivered impressive earnings for the second quarter. 

While most brands struggle with sales as consumers are becoming more stringent with discretionary spending, the company reported an 11% sales growth. This led to revenue of $2.21 billion for the quarter, exceeding the consensus of $2.17 billion.

And, the company grew profitability as well – reporting a net income of $341.6 million, or $2.68 per share. Meanwhile, analysts were forecasting EPS of $2.53.

The British Columbia retailer attributed much of this growth to expansion efforts, as they managed to bring in new customers worldwide. 

In fact, sales internationally grew 52% in the quarter – much of which is a result of the reopening of China stores and new pop-ups in Thailand. But even domestically, the company grew sales 11%.

CEO Calvin McDonald says that the company is profitable in every segment and market in which it operates and that things are just starting to heat up. 

In saying that, Lululemon expects to continue this trajectory for the current quarter ending in October. It’s forecasting revenue between $2.17 billion to $2.19 billion, well north of the $1.73 billion analysts are forecasting.

Looking even further ahead to the full-year guidance, Lululemon is aiming for earnings between $12.02 to $12.17 per share and revenue of $9.51 billion to $9.57 billion. 

As a result of this news, LULU gained more than 8% over the past week and is climbing higher today – up more than 4% in Friday’s trading session. The stock has been trending higher for some time, and now sits almost 35% higher in the past year.

We wrote about the 13% gain LULU investors enjoyed in June when the company boosted its guidance for the remainder of the year. At the time, VectorVest rated the stock a buy. 

All that being said, is there reason to believe this stock can keep going? Or, is a reversal on the horizon? We’ve taken another look through the VectorVest stock analysis software and have 3 things you need to know if you’re currently invested in LULU or are considering trading this stock.

LULU Has Very Good Upside Potential and Timing With Excellent Safety to Back it Up

The VectorVest system simplifies your trading strategy by giving you clear, actionable insights in just 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each of these sits on a simple scale of 0.00-2.00, with 1.00 being the average.

Based on the overall VST rating for a given stock, though, the system issues a clear buy, sell, or hold recommendation - eliminating all guesswork and emotion from your decision-making process. As for LULU, here’s what we uncovered:

• Very Good Upside Potential: The RV rating is a comparison between a stock’s long-term price appreciation potential (forecasted 3 years out) and AAA corporate bond rates & risk. And right now, this stock has a very good RT rating of 1.33
• Excellent Safety: The RS rating is an indicator of risk, and takes into account a company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. As for LULU, the RS rating of 1.41 is excellent.
• Very Good Timing: As you can see based on the stock’s recent performance, LULU has very good timing with an RT rating of 1.33. This is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 1.36 is very good for this stock - is it enough to earn it a buy recommendation, though? 

Get a clear answer on your next move based on a system that has outperformed the S&P 500 by 10x over the past two decades and counting. A free stock analysis is just a click away at VectorVest!

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VectorVest advocates buying safe, undervalued stocks, rising in price. As for LULU, the stock is climbing higher and higher after delivering impressive Q2 earnings. It has very good upside potential and timing, with excellent safety to back it all up.

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