LululemonGrowth in the Americas, its largest market, appears to be stalling after the retailer reported flat comparable sales in the region on Wednesday and weak guidance for the current quarter.
The sportswear retailer handily beat Wall Street’s earnings estimates, but only narrowly beat sales expectations. Lululemon’s full fiscal year forecast suggests that the company expects conditions to improve in the second half of the year.
Here’s how Lululemon performed in its fiscal first quarter compared to Wall Street’s expectations, based on an LSEG analyst survey:
- Earnings per share: $2.54 vs. expected $2.38
- Revenue: $2.21 billion vs. expected $2.19 billion
Despite the muted growth, Lululemon shares rose 10% in extended trading on Wednesday. The company also announced it would increase its share repurchase program by $1 billion.
The company’s reported net income for the three-month period ended April 28 was $321 million, or $2.54 per share, compared with $290 million, or $2.28 per share, a year earlier .
Revenue rose to $2.21 billion, up about 10% from $2 billion a year earlier.
In a press release, CEO Calvin McDonald noted the “strong momentum” the company is seeing in its international markets and suggested it needs to do more work in the Americas to regain growth in the region.
“We are pleased with the progress we are making in optimizing our U.S. product lineup,” McDonald said. “Looking forward, we continue to have significant growth opportunities and are confident in our team’s ability to deliver strong performance.”
Last quarter, McDonald said the company was seeing a shift in consumer dynamics in America, but also noted that Lululemon was struggling because it didn’t have the right sizes and colors in its stores, which was hurting sales. During a call with analysts on Wednesday, McDonald said those problems continued into the fiscal first quarter.
He said Lululemon’s color range of leggings was too narrow and the company once again didn’t stock the sizes its customers wanted. McDonald added that the company didn’t buy enough of the items that ended up with consumers, which resulted in the products going out of stock. He said he expects the company to have a better inventory situation in the second half of the year.
Lululemon is still growing in America, but much more slowly than last year. In the first quarter of this year, sales in the Americas rose 3%, compared with a 17% increase in the same period last year. Comparable sales remained unchanged compared to the previous year.
Across the company, Lululemon’s comparable sales rose 6%, below the 7% increase analysts had expected, according to StreetAccount.
As growth slows in America, Lululemon gave weak guidance for the current quarter. Revenue is expected to be between $2.40 billion and $2.42 billion, just below estimates of $2.45 billion, according to LSEG. LSEG said it forecast earnings per share between $2.92 and $2.97, compared with estimates of $3.02.
The company apparently expects conditions to improve in the second half of the year. For the full year, Lululemon expects earnings per share to be between $14.27 and $14.47, above analysts’ expectations of $14.11. According to LSEG, sales are expected to be between $10.7 billion and $10.8 billion, which is in line with expectations.
Lululemon, still widely viewed as a top retailer and market leader, has been going through a rough patch of late. The stock has fallen 40% year to date since Wednesday’s close as investors worry about its growth prospects.
The company recently announced the resignation of its long-time chief product officer Sun Choe, causing its share price to decline. Lululemon could soon be on the other side of the trends, too. Denim is popular with consumers, and investors worry that shoppers could swap athleisure for jeans, which could negatively impact Lululemon’s sales.
Read the full earnings release here.
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2024-06-05 21:04:07
www.cnbc.com
