LululemonGrowth within the Americas, its largest market, appears to be stalling after the retailer on Wednesday reported flat comparable sales within the region and weak forecasts for the present quarter.
The sporting goods retailer comfortably beat Wall Street’s earnings forecasts but barely beat revenue expectations. Lululemon’s full-year guidance suggests the corporate is betting that conditions will improve within the second half of the yr.
Here’s how Lululemon performed in its first fiscal quarter in comparison with Wall Street expectations (based on an analyst survey conducted by LSEG):
- Earnings per share: USD 2.54 versus expected USD 2.38
- Revenue: $2.21 billion in comparison with expected $2.19 billion
Despite the muted growth, Lululemon shares rose 10 percent in prolonged trading Wednesday. The company also announced it will increase its share buyback program by $1 billion.
The company reported net income for the three-month period ended April 28 was $321 million, or $2.54 per share, in comparison with $290 million, or $2.28 per share, a yr earlier.
Revenue increased to $2.21 billion, a rise of about 10% from the previous yr’s $2 billion.
In a press release, CEO Calvin McDonald praised the “strong momentum” the corporate is experiencing in its international markets and suggested that the corporate must do more in North and South America to return to growth within the region.
“We are very pleased with the progress we have made in optimizing our U.S. product portfolio,” McDonald said. “We still have a lot of growth potential going forward and are confident that our team will achieve these goals.”
Last quarter, McDonald said the corporate was seeing a shift in consumer dynamics in America, but additionally noted that Lululemon made mistakes by not having the appropriate sizes and colours in its stores, which led to lost sales. During a conference 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 small and the corporate once more ran out of stock within the sizes its customers wanted. McDonald added the corporate didn’t buy enough of the items that were resonating with consumers, which led to products being out of stock. He said he expects the corporate to have a greater inventory position within the second half of the yr.
Lululemon remains to be growing in America, but at a much slower pace than last yr. In the primary quarter of this yr, sales in America rose 3%, in comparison with 17% in the identical period last yr. Comparable sales were flat year-on-year.
According to StreetAccount, Lululemon’s comparable sales rose 6 percent companywide, falling wanting the 7 percent increase expected by analysts.
With growth in America slowing, Lululemon has issued a weak forecast for the present quarter. The company expects sales of between $2.40 billion and $2.42 billion, just under estimates of $2.45 billion, in accordance with LSEG. Earnings per share are expected to be between $2.92 and $2.97, in accordance with LSEG, in comparison with estimates of $3.02.
The company apparently expects conditions to enhance within the second half of the yr. For the total yr, Lululemon expects earnings per share to be between $14.27 and $14.47, above the $14.11 expected by analysts. Revenue is predicted to be between $10.7 billion and $10.8 billion, which LSEG said was consistent with expectations.
Lululemon, still considered an industry-leading retailer and market leader, has been going through a little bit of a rough patch these days, with shares down 40% year-to-date as of Wednesday’s close as investors grow concerned in regards to the company’s growth prospects.
The company recently announced that its longtime chief product officer Sun Choe could be stepping down, causing shares to fall. Lululemon may soon find itself on the opposite side of the trend, too. Denim is extremely popular with consumers without delay, and investors fear that athleisure shoppers could switch to jeans, which could hurt Lululemon’s sales.
