Lululemon (LULU) Q1 2024 Earnings

LululemonThe company’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 poor for the current quarter.

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

Here’s how Lululemon did in its fiscal first quarter compared to what Wall Street expected, based on LSEG’s survey of analysts:

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

Despite tepid growth, Lululemon shares rose 10% in Wednesday’s extended trading session. The company also announced it would add another $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 votes, 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 praised the “strong momentum” the company is seeing in international markets and hinted that it needs to do more in the Americas to growing again in the area.

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

Last quarter, McDonald’s said the company was seeing a shift in consumer dynamics in the Americas, but also noted that Lululemon was struggling without the right sizes and colors in its stores. , which affected sales. On a call with analysts Wednesday, McDonald’s said those problems continued into the fiscal first quarter.

He said Lululemon’s color range was too narrow for leggings and the company was once again out of stock in the sizes customers wanted. McDonald added that the company did not buy enough items to reach consumers, leading to the product being 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 the Americas but at a much slower pace than last year. In the first quarter of this year, sales in the Americas increased 3%, compared with a 17% increase in the same period last year. Comparable sales were unchanged from last year.

Across the business, Lululemon’s comparable sales rose 6%, less than the 7% increase analysts had expected, according to StreetAccount.

As growth slows in the Americas, Lululemon issued a weak forecast for the current quarter. LSEG expects revenue to be in the range of $2.40 billion to $2.42 billion, below estimates of $2.45 billion. According to LSEG, it guided for earnings per share between $2.92 and $2.97, compared with estimates of $3.02.

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, above the $14.11 analysts were expecting. According to LSEG, revenue is expected to be between $10.7 billion and $10.8 billion, in line with expectations.

Lululemon, still considered by many to be the best retailer and market leader, has been having a bit of a rough time lately. Its shares fell 40% as of Wednesday’s close, as investors grew concerned about its growth prospects.

The company recently announced that longtime Chief Product Officer Sun Choe would step down, sending shares lower. Lululemon may soon find itself on the other side of the trend, too. Denim is having a major moment with consumers, and investors are concerned that shoppers may trade in athleisure wear for jeans, which could hurt Lululemon’s sales.

Read the full earnings release here.

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