lululemon Holiday earnings beat expectations on Thursday, but the sportswear retailer’s guidance came in below expectations as its growth stalled in North America.
Here’s how the company’s fiscal fourth quarter performance compared to Wall Street expectations, according to a survey of analysts by LSEG (formerly Refinitiv):
- Earnings per share: $5.29 Estimated $5.00
- Revenue: $3.21 billion, $3.19 billion expected
The company reported net income of $669.5 million, or $5.29 a share, for the three months ended Jan. 28, compared with $119.8 million, or 94 cents a share, a year earlier.
Sales increased to US$3.21 billion, an increase of approximately 16% from US$2.77 billion in the same period last year.
The stock fell about 6% in after-hours trading Thursday.
Like its peers, Lululemon has struggled with uncertain demand and a slowdown in discretionary spending, which has hit the apparel segment particularly hard. Investors have been watching Lululemon’s performance in North America, where it has the largest sales, as the company struggles more than last year and competes with consumers who choose experiences over goods like clothes and shoes.
Sales in the Americas grew 9% this quarter, compared with 29% growth in the same period last year. While Lululemon is still growing in the region, the rate of growth has slowed significantly as the company focuses on international expansion.
According to reports, international sales increased by 54% this quarter, of which sales in China increased by 78% and sales in other Lululemon markets increased by 36%.
Lululemon expects net revenue for this quarter to be between US$2.18 billion and US$2.2 billion, an increase of 9% to 10%. Analysts expect sales to reach $2.25 billion, or 12.5% growth, according to LSEG.
According to LSEG, diluted earnings per share are expected to be between $2.35 and $2.40, below analysts’ expectations of $2.55.
Full-year sales are expected to be between $10.7 billion and $10.8 billion, compared with expectations of $10.9 billion, according to LSEG.
According to LSEG, it expects diluted earnings per share to be between $14 and $14.20 this year, compared with expectations of $14.13.
Lululemon has long been one of the leaders in the women’s activewear market, but the Vancouver-based company faces stiffer competition than ever. New entrants like Alo Yoga and Vuori have been chipping away at Lululemon’s market share, and it will have to work harder to stand out in a more crowded category.
The retailer has been working to expand its footwear offerings and grow its menswear business. During the quarter, the company opened its first men’s clothing store in Beijing, a key growth market for the company. In February, the company launched its first men’s sneaker, the CityVerse, and plans to introduce new running styles for men and women as performance sneakers remain a bright spot in a stagnant footwear market.
With the holidays just around the corner, CEO Calvin McDonald said Black Friday is the “most important day” in the company’s history and he’s “encouraged” by the trends he’s seeing as the season begins. But the retailer’s holiday quarter outlook was slightly below analysts’ expectations.
The company provided the guidance in January after seeing sales “balance across channels, categories and geographies,” finance chief Meghan Frank said in a release.
Lululemon said it expects fourth-quarter net revenue to be between $3.17 billion and $3.19 billion, up from the previous range of $3.14 billion to $3.17 billion. The company also raised its earnings-per-share guidance and said it expects earnings to be in a range of $4.96 to $5 per share, compared with the previous range of $4.85 to $4.93.
Read the full earnings report here.
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