lululemonGrowth in the U.S. continues to slow, but the sportswear retailer is making huge headway overseas, with sales up 9% year-over-year.
The yoga pants company beat Wall Street’s revenue and profit expectations on Thursday And said he was “delighted” with the start of the holiday.
Here’s how Lululemon performed in its fiscal third quarter compared to Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: $2.87 vs expected $2.69
- income: $2.40 billion vs. $2.36 billion expected
The stock rose about 8% in after-hours trading Thursday.
The company’s net profit for the three-month period ended Oct. 27 was $352 million, or $2.87 a share, compared with $249 million, or $1.96 a share, a year earlier.
Sales increased to US$2.4 billion, an increase of approximately 9% from US$2.2 billion in the same period last year.
For the most important holiday shopping quarter, Lululemon expects revenue to be between $3.48 billion and $3.51 billion, an increase of 8% to 10% from the previous year. LSEG said analysts expected revenue of $3.5 billion, or 9.1% growth, roughly in line with the midpoint of guidance.
Earnings per share are expected to be in a range of $5.56 to $5.64, with the upper end higher than analysts’ expectations of $5.59, according to LSEG.
Lululemon tightened its full-year revenue guidance, raising it just a tiny bit. Fiscal 2024 revenue is now expected to be between $10.45 billion and $10.49 billion, compared with previous guidance of $10.38 billion to $10.48 billion. LSG says outlook will beat Wall Street forecast of $10.44 billion
Earnings per share are expected to be between $14.08 and $14.16, above analysts’ expectations of $13.97.
Lululemon went through a rough patch last year. It’s still growing, but at a slower pace than before, and the competitive environment has become more intense. Lululemon has been competing with traditional giants such as Nike, gap’s athletes and Leviof Beyond Yoga, but new disruptors like Vuori and Alo Yoga are also taking market share from the Canadian retailer.
The company has turned to China for growth, with sales improving across the business so far. Comparable sales for the company rose 4% in the quarter, according to StreetAccount, beating Wall Street expectations for 3.2% growth.
Behind this figure is a 2% decrease in U.S. comparable sales, but a 25% increase in international comparable sales. Overall revenue in the Americas region increased by 2% this quarter, and overall revenue in the international region increased by 33%. Despite this, the Americas remain Lululemon’s largest market, and international markets still account for only a small portion of its total revenue.
Lululemon has also encountered some challenges of its own making. The company stumbled on a high-profile product launch earlier this year and missed out on U.S. sales after failing to offer the colors and sizes its core customers wanted.
When the company reported earnings in August, Chief Executive Calvin McDonald insisted that the brand was still going strong in the United States but that its women’s business had slowed because there weren’t enough new styles to attract customers.
All of these issues coincide with the departure of longtime Lululemon chief product officer Sun Choe, who resigned in May and joined VF Corporation. At the same time, consumers, rattled by persistent inflation and an economy that feels worse than it actually is, are more picky than ever and less forgiving when brands make mistakes.
Lululemon has turned to stock buybacks to please Wall Street during tough times. This month, the company approved a $1 billion increase in its stock repurchase program. As of Thursday, about $1.8 billion remained in the program.
Lululemon is also working to improve profitability amid uncertain demand. According to data from StreetAccount, third-quarter gross profit margin growth exceeded expectations, growing by 1.5 percentage points to 58.5%, higher than analysts’ expectations of 57.5%.
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