Lululemon's growth in its largest market, the Americas, appears to be stalling after the retailer reported weak guidance for the current quarter and flat comparable sales in the region on Wednesday.
The athletic apparel retailer easily beat earnings estimates set by Wall Street, but revenue expectations were only slightly exceeded. According to Lululemon's guidance for the entire fiscal year, the company is betting that conditions will improve in the second half of the year.
Based on LSEG's survey of analysts, here is how Lululemon fared in its first fiscal quarter in comparison to Wall Street's expectations: Lululemon's stock rose 10% in extended trading on Wednesday despite the slow growth. Additionally, the company announced that it would increase its stock buyback program by $1 billion.
For the three months that ended on April 28, the business reported a net income of $321 million, or $2.54 per share, compared to $290 million, or $2.28 per share, a year earlier.
Deals rose to $2.21 billion, up around 10% from $2 billion a year sooner.
In a press release, CEO Calvin McDonald hailed the company's "strong momentum" in its international markets and suggested that more work in the Americas was necessary for the company to resume growth in the Americas.
"We are satisfied by the headway we are making to advance our U.S. item combination," said McDonald. " Looking forward, we keep on having a critical runway for development and are certain about our group's capacity to convey intensely."
Last quarter, McDonald said the organization was seeing customer elements change in the Americas, yet additionally noted Lululemon bungled by not having the right sizes and varieties in its stores, which hit deals. During a call with experts on Wednesday, McDonald said those issues went on during the financial first quarter.
He claimed that Lululemon's leggings' color selection was too limited and that the company was once more out of stock of the sizes that customers wanted. McDonald said that the company didn't buy enough of the products that customers were buying, so they were out of stock. He stated that during the second half of the year, he anticipates the company to have improved inventory levels.
Lululemon's expansion in the Americas continues, albeit at a significantly slower rate than last year. Sales in the Americas increased by 3% in the first quarter of this year, compared to a 17% increase during the same time last year. Similar deals were level from a year ago.
According to StreetAccount, Lululemon's comparable sales increased by 6% across the board, which was lower than the 7% increase that analysts had anticipated.
Lululemon provided subpar guidance for the upcoming quarter as growth in the Americas slows. In comparison to LSEG's estimates of $2.45 billion, it anticipates revenue of $2.40 billion to $2.42 billion. According to LSEG, it anticipated earnings per share of between $2.92 and $2.97, in contrast to estimates of $3.02
It would appear that the business anticipates improved conditions in the second half of the year. Lululemon anticipates earnings per share for the entire year to be between $14.27 and $14.47, exceeding analysts' expectations of $14.11. According to LSEG, it anticipates revenue of $10.7 billion to $10.8 billion, which is in line with expectations.
Despite continuing to be widely regarded as a market leader and best-in-class retailer, Lululemon has recently experienced some difficulties. As of Wednesday's close, investors are becoming concerned about the company's growth prospects, which is why its stock is down 40% year to date.
Shares fell as a result of the company's recent announcement that its longtime Chief Product Officer, Sun Choe, would be stepping down. Lululemon may soon also find itself on the opposing side of fashion. Investors have been concerned that consumers may be switching from athleisure to jeans, which could hurt Lululemon's bottom line. Denim is having a big moment with consumers.
Written By Elara Elii
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