Shares of lululemon athletica, Inc. (NASDAQ:LULU) rose nearly 15% in December, according to S&P Capital IQ data, after the company reported fiscal Q3 earnings on Dec. 7, 2016 that were ahead of expectations and seemingly showing a turning point for the yoga-inspired athletic wear company.
During the fiscal Q3 for the period ended Oct. 30, Lululemon posted sales up 13% year over year to $544 million. Same-store-sales growth came in a 4% over Q3 2015, 7% if you include direct-to-consumer sales. Earnings per share beat analyst estimates at $0.50 per share, up 32% year over year.
Wall Street was clearly impressed with the results, which sent the stock soaring following the release. Other than the strong earnings growth during the quarter, the company also announced a share-buyback plan for $100 million, which helped to drive up sentiment that the company expects these positive results to continue. Following the earnings release, the company received a host of analyst upgrades.
Lululemon has been volatile in the past few years, especially the first half of 2016 leading up to the strong Q3. The stock tanked throughout September after Q2 earnings strongly disappointed, and the stock is still down about 10% over the past six months, even after the surge in December. Still, this looks as if it could be the start of a renewed period of growth for Lululemon as it continues to focus on operational efficiency, international expansion, and growth in the menswear segment.
Looking ahead, Lululemon thinks it can double its sales and more than double its earnings by the end of 2020, a feat that would certainly make its stock look like a value now trading at just 35 times earnings and 26 times forward earnings estimates, for a company that has historically commanded a high P/E multiple.
That may be easier said than done, as companies such as Nike (NYSE:NKE) and Under Armour (NYSE:UAA)(NYSE:UA) look to increase their own presence in women's wear and higher-end 'athleisure-wear', while already having a much bigger presence internationally than Lululemon. Still, there could be plenty of room for all of these companies to continue expanding as discretionary spending rises and the preference toward high-quality athleisure wear grows worldwide.