Oxford, MS 9/6/2011 (PennyPayDay) – Believe better inventory position helped to support continuation of robust sales. Lululemon Athletica Inc. (Nasdaq:LULU) is scheduled to report Q2 results before the market open on 9/9 with a call at 9:00 AM EST. The estimate has been $0.22 (vs. $0.15 LY), which is in-line with current consensus. The projection is based on a total sales gain of 35.6% to $206.4 million with SSS +17.0% constant currency vs. a challenging 31.0% LY. On this basis, Retail Metrics consensus is currently at 16.5% and guidance is for a gain in the mid- to high teens.Management indicated on the prior call on 6/10 that the company was in a better inventory position in Q2 than in Q1, with an inventory injection and dramatic increases in prints and colors, though levels for Q2 were still not thought to be optimal. The company was expected to be in a much better position in Q3, with significantly increased penetration of technical tops and some styling in outerwear, with our research suggesting that levels are in fact running more appropriately in August. Checks suggest that business has remained quite strong in the U.S. through August and positive in Canada, though recent reports from other retailers on Canadian business suggest that trends in the region could be relatively weaker.
FY11 estimates already above the high end of the most recent guidance range. The estimate for FY11 has been $1.10, which is in line with current consensus and above the high end of management's $1.05-$1.08 guidance range. Investors will likely be highly focused in particular on the margin outlook for the 2H, as management had most recently indicated expectations for 225-250 bp of GM pressure from cost inflation partially offset by leverage of fixed costs and distribution efficiencies (leading to a slight decline in GMs for FY11 overall).
Maintaining Neutral rating.
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