Lululemon (LULU) Q1 Earnings Report Preview: What To Look For

Athletic apparel retailer Lululemon (NASDAQ:LULU) will be reporting earnings tomorrow afternoon. Here's what to look for.

Lululemon met analysts' revenue expectations last quarter, reporting revenues of $3.21 billion, up 15.6% year on year. It was a mixed quarter for the company, with full-year revenue guidance missing analysts' expectations. On the other hand, Lululemon slightly topped analysts' revenue and EPS expectations during the quarter. The company's growth was driven by a 12% increase in its same-store sales, with American stores growing 7% and international stores growing 44% on a constant currency basis.

Is Lululemon a buy or sell going into earnings? Read our full analysis here, it's free.

This quarter, analysts are expecting Lululemon's revenue to grow 9.8% year on year to $2.20 billion, slowing from the 24% increase it recorded in the same quarter last year. Adjusted earnings are expected to come in at $2.40 per share.

The majority of analysts covering the company have reconfirmed their estimates over the last 30 days, suggesting they anticipate the business to stay the course heading into earnings. Lululemon has a history of exceeding Wall Street's expectations, beating revenue estimates every single time over the past two years by 2.7% on average.

Looking at Lululemon's peers in the apparel retailer segment, some have already reported their Q1 results, giving us a hint as to what we can expect. Gap delivered year-on-year revenue growth of 3.4%, beating analysts' expectations by 3.1%, and Abercrombie and Fitch reported revenues up 22.1%, topping estimates by 5.8%. Gap traded up 29.3% following the results while Abercrombie and Fitch was also up 17.1%.

Read our full analysis of Gap's results here and Abercrombie and Fitch's results here.

There has been positive sentiment among investors in the apparel retailer segment, with share prices up 11.5% on average over the last month. Lululemon is down 12.9% during the same time and is heading into earnings with an average analyst price target of $424.8 (compared to the current share price of $305).

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