lululemon-Investors Who Wrote Off Lululemon Were Wrong as Shares Jump on Strong Revenue Growth. Is It Too Late to Buy the Stock?

Core Viewpoint - Lululemon Athletica has reported strong fiscal first-quarter results, but its stock has faced challenges, declining over 30% year to date, raising questions about whether it is a good time to invest in the company [1]. Financial Performance - Lululemon's revenue for the fiscal first quarter increased by 10% to $2.2 billion, with constant currency growth of 11% [2]. - Women's sales rose by 10%, men's sales increased by 15%, and accessory sales grew by 2% [2]. - Revenue in the Americas grew by 3% (4% in constant currencies), while international sales surged by 35% (40% in constant currencies) [2]. - Same-store sales increased by 7%, with international same-store sales up by 29% and a 33% increase in China [2]. - The company reported a gross margin of 57.7%, up 20 basis points, and product margins increased by 120 basis points [3]. Inventory and Store Expansion - Inventory levels decreased from$ 1.58 billion a year ago to $1.35 billion, indicating effective inventory management [3]. - Lululemon ended the quarter with 711 stores, an increase from 662 stores at the end of Q1 last year [3]. Future Outlook - The company forecasts fiscal second-quarter revenue between$ 2.40 billion to $2.42 billion, representing growth of 9% to 10% [4]. - For the full year, Lululemon expects revenue between$ 10.7 billion to $10.8 billion, equating to growth of 11% to 12% [4]. - The adjusted EPS for the full year is projected to be in the range of$ 14.27 to $14.47, an increase from previous forecasts [4]. - Lululemon plans to open 35 to 40 new stores this year, focusing on the U.S. and China [4]. Product Innovation - The company aims to drive growth in the second half of the year through new product introductions, including a new performance fabric for leggings and a versatile swimsuit line [5]. - In men's apparel, Lululemon is introducing Show Zero technology to reduce the appearance of sweat on shirts [5]. Market Sentiment - Despite strong performance, Lululemon's stock has struggled due to concerns about brand power and changing consumer behavior in the U.S. [6]. - Analysts have expressed bearish views, citing a slowdown in the athleisure category and increased competition [6]. - However, Lululemon's strong brand recognition and successful international expansion, particularly in China, suggest potential resilience against competition [7]. Valuation - Lululemon shares are currently trading at a forward price-to-earnings (P/E) ratio of around 23, below its historical valuation of 30 or more [8].