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On Friday, Evercore ISI analysts adjusted their outlook on Lululemon Athletica Inc. (NASDAQ:LULU), lowering the price target from $495.00 to $440.00 while maintaining an Outperform rating. The revision follows Lululemon’s recent financial performance report which exceeded their fourth-quarter guidance with earnings per share (EPS) of $6.14, surpassing both Evercore ISI’s estimate of $5.88 and the consensus of $5.85. According to InvestingPro data, LULU maintains impressive gross profit margins of 58.85% and has demonstrated strong financial health, earning a "GREAT" overall score of 3.16 out of 5.
The company’s guidance for 2025 was a focal point, with headline EPS projections ranging from $14.95 to $15.15, excluding buybacks. This forecast aligns closely with the consensus estimate of $15.37 when factoring in approximately $0.25 from buybacks. Despite slower traffic in U.S. stores during the first quarter, which Lululemon believes to be an industry-wide issue, revenue trends in the Americas have remained consistent with the fourth quarter. With a current market capitalization of $41.46 billion and a P/E ratio of 24.63, InvestingPro analysis suggests the stock is currently trading below its Fair Value, presenting a potential opportunity for investors. Get access to the comprehensive Pro Research Report, along with 10+ additional ProTips and detailed financial metrics, available exclusively on InvestingPro.
Analysts highlighted two positive aspects that surpassed expectations: gross margins (GM) and key performance indicators (KPI) related to products. For the first quarter, Lululemon guided for flat year-over-year gross margins, with product margins increasing and markdowns remaining steady. Additionally, the company reported an acceleration in units per transaction and average order value in the first quarter compared to the fourth, attributed to ramped-up product innovation. The company’s strong financial position is further evidenced by its healthy current ratio of 2.0 and moderate debt levels, with a debt-to-equity ratio of 0.38.
Evercore ISI anticipates a slight dip in Lululemon’s stock price following the confirmation of sluggish first-quarter trends, but also noted the absence of significant negative news that could fuel bearish sentiment. The firm suggests that the key question for the stock in the near term will be whether U.S. sales slow relative to the guidance provided by Lululemon, which includes low-single-digit percentage declines in U.S. same-store sales (SSS) for the year without anticipating improvements in macroeconomic or traffic headwinds.
The analysts remain optimistic, citing improving KPIs indicating a positive consumer response to new product innovations. They also expect that factors such as less impactful weather, upcoming shopping events like Easter, and easier SSS comparisons after the first quarter will potentially lead to better traffic in April. With Lululemon’s 2025 guidance set at a price-to-earnings (P/E) ratio of 20 times the upper end of its range—a target the analysts believe the company will not miss—Evercore ISI maintains a constructive stance on the stock.
In other recent news, Lululemon Athletica Inc. reported impressive financial results for the fourth quarter of 2024, surpassing Wall Street expectations. The company achieved an earnings per share (EPS) of $6.14, exceeding the forecasted $5.82, and reported a revenue of $3.61 billion, surpassing the anticipated $3.57 billion. Despite these strong earnings, Lululemon’s stock experienced a decline in aftermarket trading, influenced by broader market concerns and guidance on margins. The company projected revenue growth of 5-7% for 2025, with expectations of modest growth in the U.S. and a slight negative impact from foreign exchange. Analysts have noted potential pressures on gross margins, reflecting market challenges. Lululemon also completed a significant stock repurchase program, buying back $1.6 billion worth of shares in 2024. The company remains focused on product innovation and market expansion, with plans to open new stores and optimize existing ones globally, including entering new markets such as Italy and expanding in China.
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