Financial Report Outlook | Q4 Revenue and Profit Expected to Double, Can this Help Lululemon (LULU.US) Stock Price Stop Falling and Rebound?

Lululemon Athletica (LULU.US) will announce its fourth quarter earnings on March 27th (Thursday) Eastern Time. Analysts expect Lululemon's Q4 revenue to be $3.59 billion, a 12% year-over-year increase, slightly higher than the high end of the company's guidance range, a strong growth largely attributed to the extra week in the quarter; adjusted earnings per share are expected to reach $5.86, an 11% increase year-over-year. Q4 earnings are coming! What themes are worth paying attention to? Lululemon has consistently outperformed market expectations on profits, so independent research company DM Martins Research founder Daniel Martins believes that the fourth quarter performance will not have a big impact on this investment theme. Instead, this report will focus on several key topics, with the most important possibly being the outlook for the fiscal year 2025. Lululemon has committed to achieving $12.5 billion in revenue by 2026. This year's guidance may help boost confidence in this goal, but could also raise questions. Comparable store sales are also of interest. Currently, Lululemon's number of stores has increased by nearly 10%, which helps boost its revenue. However, with comparable store sales in the Americas declining by 2%, with the performance in the US market possibly worse, investors may hope for better news on sales in larger, more mature markets. Investors will also be focused on how the macroeconomic environment is affecting Lululemon's operations, both on the procurement side and on the demand side. It is reported that Lululemon's supply chain is spread across many countries, especially in Asia. Thus, Martins expects that the trade war will not have a significant impact on the company's supply chain. However, there is enough evidence to suggest that consumers may be more cautious about discretionary spending recently. The 2025 performance guidance should reflect the management team's view of the current macroeconomic situation, with Martins suggesting the guidance may be conservative. Transition from growth stock to value stock In terms of stock performance, over the past 12 to 18 months, Lululemon's stock price has followed the long-term earnings growth expectations. This clearly indicates that the stock is still being driven by the company's growth prospects, which have recently been tested. After dropping by 25% last year, Lululemon's stock price has fallen by 16% so far this year. At this time last year, long-term earnings growth expectations were over 20%, but have nearly halved. The forward price-earnings ratio has also decreased from around 25 times to the current 19.5 times. Martins believes that Lululemon is in a transition phase from a growth stock to a value stock. This is not good news for Lululemon investors. The market seems to have the same expectations for Lululemon as it did during the company's peak. However, given the company's current size and signs of maturity in its key geographic markets, the expectation of sustained profit growth of 20% to 30% is becoming increasingly difficult to achieve. Once the valuation drops enough to attract value investors, the narrative may change. Martins is concerned that the stock may face further downside risk until it begins to look more like a value stock.