Lululemon (NASDAQ: LULU) is scheduled to report its first quarter results this Thursday after market hours, with investors watching closely for signs of a recovery.
The athletic apparel retailer posted revenues of $3.64 billion last quarter, flat year on year, narrowly beating analyst revenue expectations despite a broadly disappointing performance.
Last quarter’s earnings per share guidance for the following period missed analysts’ expectations significantly, while full-year EPS guidance also fell short of what Wall Street had anticipated.
For the current quarter, analysts are projecting revenue growth of 2.5% year on year, a notable slowdown from the 7.3% growth the company recorded in the same period last year.
Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they expect the business to stay the course heading into the earnings release.
Lululemon has missed Wall Street’s revenue estimates multiple times over the last two years, adding pressure on the company to demonstrate renewed momentum with this week’s report.
Sector peers have already provided some context for expectations, with Victoria’s Secret delivering year-on-year revenue growth of 15.3% and beating analyst expectations by 2.6% in their most recent quarter.
Urban Outfitters also outperformed, reporting revenues up 11.4% year on year and topping estimates by 1.4%, with shares rising 2.9% in the immediate aftermath of that announcement.
Broader sentiment across the apparel retailer segment has been positive over the past month, with share prices in the sector rising an average of 2.8% during that period.
Lululemon has moved in the opposite direction, declining 2.1% over the same timeframe and heading into earnings with an average analyst price target of $176.04, compared to a current share price of $126.31.
The significant gap between the current trading price and the average analyst price target underscores the degree to which investor confidence in Lululemon has eroded ahead of this week’s release.
With sector peers posting strong growth figures, Thursday’s results will be a critical test of whether Lululemon can close the performance gap and reassure investors that its business trajectory is stabilizing.
