Shares of Lululemon plunged on Friday after the sportswear retailer issued disappointing guidance and said it was seeing weak sales within the U.S., its biggest market.
The retailer reported holiday earnings Thursday evening that beat expectations, but showed its growth in North America was stalling.
Here’s how the corporate performed in its fiscal fourth quarter in comparison with Wall Street’s expectations, based on an analyst survey from LSEG, formerly often called Refinitiv:
- Earnings per share: $5.29 vs. $5.00 expected
- Revenue: $3.21 billion vs. expected $3.19 billion
The company’s reported net income for the three-month period ended Jan. 28 was $669.5 million, or $5.29 per share, compared with $119.8 million, or 94 cents per share, a 12 months earlier .
Revenue rose to $3.21 billion, up about 16% from $2.77 billion a 12 months ago.
Lululemon shares closed about 16% lower on Friday. As of Friday’s close, shares are down about 21% this 12 months and have significantly underperformed S&P 500which has increased by about 10% during this time.
Like its competitors, Lululemon is grappling with uncertain demand and a slowdown in consumer spending that has hit the apparel sector particularly hard. Investors have been watching how Lululemon fares in North America, its top-selling region, as the corporate performs tougher year-over-year and competes with consumers who value experiences greater than goods like clothing and shoes.
During the quarter, sales within the Americas grew 9%, in comparison with 29% growth within the year-ago period. While Lululemon continues to be growing within the region, the pace has slowed significantly as Lululemon focuses on international expansion.
“As you have heard from others in our industry, U.S. consumer behavior has changed recently, and we are off to a slower start to the year in this market,” CEO Calvin McDonald said in a call with analysts Thursday. “We view this as an opportunity to continue to go on the offensive as we focus on investments that continue our growth trajectory. Outside the U.S., our business remains strong.”
McDonald added that each traffic and conversions are down within the US. He attributed this to a scarcity of products in sizes 0 to 4, the important thing sizes for the U.S. customer base, and never enough colourful items.
Meanwhile, international sales reportedly rose 54%, with sales in China up 78% and Lululemon’s remaining markets up 36%.
According to StreetAccount, comparable sales rose 12% through the quarter, falling just in need of the 12.3% increase analysts had expected.
For the present quarter, Lululemon expects net sales to be between $2.18 billion and $2.20 billion, representing growth of 9% to 10%. According to LSEG, analysts expected a forecast of $2.25 billion, or growth of 12.5%.
According to LSEG, diluted earnings per share are expected to be between $2.35 and $2.40, below analysts’ expectations of $2.55.
For the complete 12 months, LSEG said revenue is predicted to be between $10.7 billion and $10.8 billion, compared with estimates of $10.9 billion.
Diluted earnings per share for the 12 months are expected to be between $14 and $14.20, compared with estimates of $14.13, in response to LSEG.
Lululemon has long been a frontrunner in women’s activewear, however the Vancouver-based company is facing more competition than ever. Newer entrants like Alo Yoga and Vuori have denied market share to Lululemon, and the corporate has needed to work harder to face out within the crowded category.
The retailer has been working to expand its footwear offerings and grow its men’s business. During the quarter, the corporate opened its first men’s store in Beijing – a key growth marketplace for the corporate. In February, the corporate introduced its first men’s sneaker, CityVerse, and plans to introduce latest running models for men and ladies as performance sneakers proceed to be a brilliant spot in an otherwise stagnant footwear market.
Looking ahead to the vacations, McDonald said Black Friday was the “biggest day” in the corporate’s history and he was “encouraged” by the trends he saw early within the season. But the retailer’s outlook for the vacation quarter fell barely in need of analysts’ expectations.
In January, the corporate raised that forecast after finding that sales were “balanced across channels, categories and regions,” Chief Financial Officer Meghan Frank said in a news release.
Read the complete earnings release Here.
