Lululemon shares pop 10% despite lackluster earnings report and guidance

Lululemon‘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
athletic
apparel
retailer
handily
beat
Wall
Street’s
earnings
estimates,
but
only
narrowly
topped
revenue
expectations.
Lululemon’s
full
fiscal-year
guidance
suggests
the
company
is
betting
conditions
will
improve
in
the
back
half
of
the
year. 

Here
is
how
Lululemon
did
in
its
first
fiscal
quarter
compared
to
what
Wall
Street
was
anticipating,
based
on
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’s
stock
jumped
10%
in
extended
trading
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
that
ended
April
28
was
$321
million,
or
$2.54
per
share,
compared
to
$290
million,
or
$2.28
per
share,
a
year
earlier.  

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

In
a
news
release,
CEO
Calvin
McDonald
touted
the
“strong
momentum”
the
company
is
seeing
in
its
international
markets
and
hinted
that
it
needs
to
do
more
work
in
the
Americas
to
grow
in
the
region
again.

“We
are
pleased
by
the
progress
we
are
making
to
optimize
our
U.S.
product
assortment,”
said
McDonald.
“Looking
ahead,
we
continue
to
have
a
significant
runway
for
growth
and
are
confident
in
our
team’s
ability
to
powerfully
deliver.” 

Last
quarter,
McDonald
said
the
company
was
seeing
consumer
dynamics
change
in
the
Americas,
but
also
noted
Lululemon
fumbled
by
not
having
the
right
sizes
and
colors
in
its
stores,
which
hit
sales. During
a
call
with
analysts
on
Wednesday,
McDonald
said
those
issues
continued
during
the
fiscal
first
quarter.

He
said
Lululemon’s
color
assortment
was
too
narrow
in
leggings,
and
the
company
was
once
again
out
of
stock
of
the
sizes
its
customers
wanted.
McDonald
added
the
company
did
not
buy
enough
of
the
items
that
were
landing
with
consumers,
leading
to
products
being
out
of
stock.
He
said
he
expects
the
company
to
be
in
a
better
inventory
position
in
the
second
half
of
the
year.

Lululemon
is
still
growing
in
the
Americas,
but
at
a
much
slower
pace
than
last
year.
During
the
first
quarter
of
this
year,
sales
in
the
Americas
increased
3%,
versus
a
17%
jump
in
the
year-ago
period.
Comparable
sales
were
flat
from
last
year.

Across
the
business,
Lululemon’s
comparable
sales
grew
6%,
below
the
7%
uptick
that
analysts
had
expected,
according
to
StreetAccount. 

As
growth
in
the
Americas
slows,
Lululemon
issued
weak
guidance
for
the
current
quarter.
It
expects
revenue
to
be
between
$2.40
billion
and
$2.42
billion,
just
below
estimates
of
$2.45
billion,
according
to
LSEG.
It
guided
earnings
per
share
to
be
between
$2.92
and
$2.97,
compared
to
estimates
of
$3.02,
according
to
LSEG. 

The
company
appears
to
be
expecting
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,
ahead
of
the
$14.11
that
analysts
had
expected.
It
is
expecting
revenue
to
be
between
$10.7
billion
and
$10.8
billion,
which
is
in
line
with
expectations,
according
to
LSEG. 

Lululemon,
still
widely
considered
to
be
a
best-in-class
retailer
and
a
market
leader,
has
hit
a
bit
of
a
rough
patch
as
of
late.
Its
stock
is
down
40%
year
to
date
as
of
Wednesday’s
close,
as
investors
become
concerned
about
its
growth
prospects. 

It
recently
announced
that
its
longtime
Chief
Product
Officer
Sun
Choe
would
be
resigning,
which
caused
shares
to
fall.
Lululemon
could
also
soon
find
itself
on
the
other
side
of
trends.
Denim
is
having
a
major
moment
with
consumers,
and
investors
have
been
concerned
that
shoppers
could
be
swapping
athleisure
for
jeans,
which
could
hit
Lululemon’s
topline. 

Read
the
full
earnings
release
here.