Lululemon shares jump 10% despite lackluster earnings and guidance
The latest financial report shows that Lululemon's growth and guidance are not outstanding, but its stock price still rose 10% in extended trading on Wednesday.
The latest financial report shows that Lululemon's international market is growing strongly, but the American market needs further improvement to regain growth momentum.
Strong growth in the international market
Lululemon's strong growth in the international market offset the slowdown in the American market. Although the company's profits and revenue in the first quarter exceeded Wall Street's expectations, comparable sales in the Americas remained unchanged and guidance for the current quarter was weak. CEO Calvin McDonald emphasized that the company has shown strong momentum in the international market and stated that more work is needed in the Americas market to regain growth.
First quarter financial performance
Lululemon's earnings per share were $2.54, higher than the expected $2.38, and revenue was $2.21 billion, slightly higher than the expected $2.19 billion. The company announced an increase of $1 billion in its stock repurchase plan. Despite weak growth, Lululemon's stock price rose 10% in extended trading on Wednesday.
Product Portfolio Challenge
McDonald pointed out that the main challenge the company faces in the US market is that its product portfolio fails to meet consumer demand, especially in terms of color and size. This has led to some popular products being out of stock, affecting sales performance. However, McDonald stated that the company's inventory situation is expected to improve in the second half of the year.
Future outlook
Lululemon's comprehensive guidance for the 2024 fiscal year indicates that the company expects some improvement in the second half of the year. Lululemon expects annual earnings per share to be between $14.27 and $14.47, higher than analyst expectations of $14.11, and revenue between $10.7 billion and $10.8 billion, consistent with expectations.
Market Challenges and Changes
Lululemon's stock price has fallen by 40% this year, and investors are concerned about its growth prospects. The company recently announced that its long-term Chief Product Officer, Sun Choe, will resign, leading to a decline in stock prices. In addition, as jeans become increasingly popular among consumers, investors are concerned that consumers may switch from sportswear to jeans, which could affect Lululemon's revenue.
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