Lululemon Stock is Stretching Higher

Athleisure apparel and footwear maker Lululemon NASDAQ: LULU stock has rebounded after lowballing earnings estimates. The iconic athletic apparel company has resumed growth after an impressive fiscal Q4 2021 earnings report that included raised fiscal full-year 2022 top and bottom-line guidance and a $1 billion stock buyback program. Lululemon has also entered into the footwear segment on March 22, 2022, with initial responses dramatically exceeding expectations. The Company is still tackling global supply chain issues and elevated logistics expenses, but inventory and pricing have been managed extraordinarily during these disruptive times. Lululemon’s core seasonless products makes up nearly 45% of their inventory, which enables the Company to ensure proper levels to fuel top line growth all-year long. Inflationary pressures will also prompt price increases for a small portion of its styles in 2022. The Company hinted as more details of its five-year outlook at its upcoming Analyst Day. Prudent investors seeking exposure in this top athleisure play can watch for opportunistic pullbacks ahead of Analyst Day. 

Fiscal Q4 2021 Earnings Release

On March 29, 2021, Lululemon released its fiscal fourth-quarter 2021 results for the quarter ended January 2022. The Company reported diluted earnings-per-share (EPS) profit of $3.37, beating consensus analyst estimates for $3.27 by $0.10. Revenues grew 23.1% year-over-year (YOY) to $2.13 billion meeting analyst estimates for $2.13 billion. Total comparable sales rose 22% and same store sales comps rose 32% while direct to consumer rose 17% YoY. The Company authorized a $1 billion stock buyback. Lululemon CEO Calvin McDonald commented, "2021 was another successful year for lululemon, which speaks to the enduring strength of our brand and our ability to deliver sustained growth across the business. We are proud that we passed the $6 billion in annual revenue milestone for the first time, and successfully achieved our Power of Three growth target ahead of schedule. This was especially impressive given the challenging macro backdrop. We are entering the new year from a position of strength, which we’ll build upon to continue delivering for our guests and shareholders in the years to come."

Upside Guidance

The Company sees fiscal Q1 2022 EPS of $1.38 to $1.43 versus $1.28 consensus analyst estimates on revenues of $1.525 to $1.550 billion. Full-year fiscal 2022 EPS is expected between $9.15 to $9.30 versus $9.05 consensus analyst estimates on revenues between $7.490 billion to $7.615 billion versus $7.24 billion consensus analyst estimates.

Conference Call Takeaways

CEO McDonald praised the results for Q4 delivering growth in excess of the Power of Three growth plan targets with 31% growth in adjusted EPS and 22% on a two-year CAGR. He reiterated their top line guidance calls for 24% to 26% growth and 19% to 23% bottom line adjusted EPS growth in fiscal Q1 2022. He teased that they would provide a five-year outlook at their Analyst Day in the next few weeks. Athletic apparel is growing stronger than overall apparel as customers are engaging in both fitness and everyday lives with the versatile line of products. The Company is benefiting from both physical locations as well and digital channels. To offset supply chain tensions and elevated freight costs, the Company has a core lineup or seasonless products that account for 45% of its inventory. This carries minimal markdown risk and enables around the year fulfillment of customer demand. Lululemon plans on selective price increases on a fraction of its products to offset inflationary pressures. He commented on the footwear launch in March, “In development for more than 4 years and leveraging our 20 plus years of designing and creating performance gear for women, we revealed our first three styles of technical athletic shoes and one performance slide to the market. The first of our four styles, Blissfeel, began selling on March 22 in North America and Mainland China and the UK will launch shortly. The initial guest response to Blissfeel has dramatically exceeded our expectations, not to mention incredible reviews from a number of publications and guests and we will have more to share about our footwear at Analyst Day.”

LULU Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for LULU stock. The weekly rifle chart triggered a mini inverse pup breakdown on the rejection near the $404.86 Fibonacci (fib) level as shares proceeded to fall towards the $277.66 fib before staging a rally into and through earnings. The weekly 5-period moving average (MA) is attempting to rise and crossover through the 15-period MA to trigger a breakout on the weekly stochastic mini pup through the 20-band. The weekly 50-period MA is still a resistance at $274.28 as shares reverted back below that level. The weekly upper Bollinger Bands (BBs) sit at $494.31. The daily rifle chart has a 200-period MA resistance at $383.85 overlapping the daily upper BBs at $284.70 capping the earnings spike. The daily 5-period MA is rising at $357.07 as the 15-period MA follows higher at $324.45. The daily 50-period MA is slightly rising at $319.84. The daily stochastic peaked and crossed back down from the 90-band rejection. The daily

market structure low (MSL) buy triggered on the breakout through $312.43. The daily lower BBs sit at $318.23. Prudent investors can watch for opportunistic pullback levels at the $354.32, $338.10, $326.99 fib, $312.43 daily MSL trigger, $294.53 fib, $285.43 fib, and the $277.66 fib level. Upside trajectories range from the $404.86 fib level up towards the $470.11 price level.