lululemonGrowth in the Americas, its largest market, appears to have stalled after the retailer on Wednesday reported flat comparable sales in the region and weak guidance for the quarter.
The athletic apparel retailer handily beat Wall Street’s profit forecasts but only slightly topped revenue expectations. Lululemon’s full fiscal year guidance suggests the company is betting things will improve in the second half of the year.
Here’s how Lululemon performed in the first quarter compared to Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: $2.54, $2.38 expected
- Revenue: $2.21 billion, $2.19 billion expected
Despite tepid growth, Lululemon shares rose 10% in after-hours trading Wednesday. The company also announced it would add $1 billion to its stock repurchase program.
The company’s net income for the three-month period ended April 28 was $321 million, or $2.54 a share, compared with $290 million, or $2.28 a share, a year earlier.
Sales increased to US$2.21 billion, an increase of approximately 10% from US$2 billion in the same period last year.
In a press release, CEO Calvin McDonald praised the “strong momentum” the company is seeing in international markets and hinted that the company needs to do more in the Americas before it can gain traction there again. region achieves growth.
“We are pleased with the progress we have made in optimizing our U.S. product assortment,” McDonald said. “Looking ahead, we continue to have a significant runway for growth and are confident in our team’s strong ability to deliver.”
Last quarter, McDonald’s said it was seeing changes in consumer dynamics in the Americas, but also pointed to Lululemon’s missteps by not having the right sizes and colors in stores, hurting sales. McDonald said on a conference call with analysts Wednesday that those issues persisted in the fiscal first quarter.
He said the color range of Lululemon leggings was too narrow and the company was once again out of stock and unable to fill the sizes customers wanted. McDonald added that the company didn’t buy enough of what consumers were buying, causing products to go out of stock. He said he expects the company’s inventory situation to be better in the second half of the year.
Lululemon is still growing in the Americas, but at a much slower pace than last year. In the first quarter of this year, sales in the Americas region grew by 3%, compared with a 17% increase in the same period last year. Comparable sales were flat compared to last year.
Comparable sales across Lululemon’s entire business grew 6%, below analysts’ expectations of 7%, according to StreetAccount.
Lululemon issued weak guidance for the quarter as growth slows in the Americas. Revenue is expected to be between $2.40 billion and $2.42 billion, slightly below expectations of $2.45 billion, according to LSEG. According to LSEG, the company expected earnings per share of $2.92 to $2.97, compared with expectations of $3.02.
The company appears to expect conditions to improve in the second half of the year. Lululemon expects full-year earnings per share of $14.27 to $14.47, above analysts’ expectations of $14.11. According to LSEG, revenue is expected to be between $10.7 billion and $10.8 billion, in line with expectations.
Lululemon is still widely considered a premier retailer and market leader, but has encountered some difficulties of late. The company’s shares are down 40% year to date as of Wednesday’s close as investors begin to worry about the company’s growth prospects.
The company recently announced that longtime chief product officer Sun Choe would resign, causing the stock price to fall. Lululemon may also soon find itself on the other side of the trend. Denim is gaining popularity among consumers, and investors have been worried that consumers may switch from athleisure clothing to jeans, which may affect Lululemon’s revenue.
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