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Lululemon (LULU) earnings Q1 2024

lululemonAmazon’s growth in the Americas, its largest market, appears to be stalling after the retailer on Wednesday reported flat comparable sales in the region and weak guidance for the current quarter.

The sportswear retailer handily beat Wall Street earnings estimates, but only narrowly beat revenue expectations. Lululemon’s full fiscal year guidance suggests the company is betting that conditions will improve in the second half of the year.

Here’s how Lululemon fared in its fiscal first quarter compared to what Wall Street anticipated, according to a survey of analysts by LSEG:

  • Earnings per share: $2.54 vs. $2.38 expected
  • Revenue: $2.21 billion vs. $2.19 billion expected

Despite the tepid growth, Lululemon shares rose 10% in extended trading on Wednesday. The company also announced it would add $1 billion to its stock buyback program.

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 , from the previous year.

Sales rose to $2.21 billion, up about 10% from $2 billion a year earlier.

In a press release, CEO Calvin McDonald highlighted the “strong momentum” the company is seeing in its international markets and hinted that it needs to do more work in the Americas to return to growth in the region.

“We are pleased with the progress we are making to optimize our product assortment in the United States,” McDonald said. “Looking ahead, we continue to have significant growth runway and are confident in our team’s ability to deliver.”

Last quarter, McDonald said the company was seeing a shift in consumer dynamics in America, but also noted that Lululemon made mistakes by not having the right sizes and colors in its stores, which hurt sales. During a call with analysts on Wednesday, McDonald said those problems continued into the fiscal first quarter.

He said Lululemon’s color variety was too limited in leggings and that the company had once again run out of stock in the sizes its customers wanted. McDonald added that the company did not purchase enough items reaching consumers, causing products to go out of stock. He said he expects the company to have a better inventory position in the second half of the year.

Lululemon continues to grow in America, but at a much slower pace than last year. During the first quarter of this year, sales in the Americas increased 3%, compared to a 17% increase in the same period last year. Comparable sales remained stable compared to last year.

Across the business, Lululemon’s comparable sales grew 6%, below the 7% increase analysts were expecting, according to StreetAccount.

As growth in the Americas slows, Lululemon issued weak guidance for the current quarter. It expects revenue to be between $2.4 billion and $2.42 billion, just below estimates of $2.45 billion, according to LSEG. It guided earnings per share between $2.92 and $2.97, compared to estimates of $3.02, according to LSEG.

The company appears to expect 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 the $14.11 analysts were expecting. Revenue is expected to be between $10.7 billion and $10.8 billion, which is in line with expectations, according to LSEG.

Lululemon, still widely considered a best-in-class retailer and market leader, has hit a rough patch lately. Its shares are down 40% so far this year through Wednesday’s close, as investors worry about its growth prospects.

It recently announced that its former chief product officer, Sun Choe, would resign, sending the stock tumbling. Lululemon could soon find itself on the other side of the trends, too. Denim is having a big moment with consumers, and investors are concerned that shoppers may be switching from athleisure to jeans, which could hurt Lululemon’s revenue.

Read the full earnings release here.



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