Lululemon Athletica Inc. (NASDAQ:LULU) reports its quarterly earnings after surviving an apocalypse in the retail sector owing to COVID-19. The opening up of the economy allowed the company to keep open a good number of its stores, conversely shrugging off some of the slowdowns experienced in the first half of the year.
Q3 Preview
The stock rising by more than 60% over the past six months attests to growing investor confidence that the company is headed in the right direction, amid the COVID-19 shocks. In the third quarter, the company is believed to have benefited from a change in trends worldwide that saw more people work and sweat from home amid a spike in health and wellness.
During the quarter, Lululemon continued to leverage its early mover advantage in premium yoga apparel. The strengthening of direct-to-consumer channels should have allowed the company to strengthen its revenue channels.
While customer traffic to brick and mortar remained below par in the quarter, Lululemon has in the recent past increased its effort on online sales. The yoga specialist looks set to shrug off the effects of subdued traffic to retail stores on focusing more on online sales.
Earnings Expectations
Given that most of the stores remained opened for the better part of the quarter, the likelihood of the company registering revenue growth is high. In the second quarter, revenue was up 2% to $903 million. Investors also await to see the kind of outlook that the company will provide.
Investor optimism around coronavirus vaccine continues to grow, given its potential impact on Lululemon core business. Easing coronavirus fears is more than expected to result in an uptick in traffic to the company’s stores, a development that could result in revenues bouncing to pre-corona levels.
Signs of operations rebounding in view of easing coronavirus fears could strengthen investor’s sentiments in the stock, resulting in further rallies after the recent swing high. Analysts expect the company to report revenue of $1.01 billion, representing quarter over quarter growth. Earnings per share are expected at $0.86 a share.