Yahoo Finance Lululemon Regains Some Momentum in Q1 Despite U.S. Missteps
Lululemon Athletica Inc. showed a little pep in the first quarter — and Wall Street responded in kind — but the active brand is still working to get back into its stride in the U.S.
“Our business remains strong, and our brand continues to resonate with guests around the world,” said Calvin McDonald, chief executive officer, on a conference call with analysts. “We are engaging with them through our unique and compelling activations and brand campaigns and we continue to drive the business with new product innovations.”
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First-quarter net income increased 10.7 percent to $321.4 million, or $2.54 a diluted share, from $290.4 million, or $2.28, a year earlier.
Earnings per share came in 16 cents ahead of the $2.38 analysts projected, according to Yahoo Finance.
Revenues for the quarter ended April 28 increased 10.4 percent to $2.2 billion from $2 billion a year earlier. In the Americas, revenues rose by 3 percent with flat comparable sales, while international sales increased by 35 percent with a 25 percent comp gain.
And Lululemon is feeling a little better about the year and raised its annual earnings per share forecast to $14.27 to $14.47, up from the $14 to $14.20 projected in March. Revenues are still slated to rise by 11 to 12 percent to a range of $10.7 billion to $10.8 billion.
The company is also looking to give a little more back to shareholders. After repurchasing 800,000 shares for $296.9 million in the first quarter, Lululemon increased its share repurchase program by $1 billion. It now has $1.7 billion available to buy back stock.
Investors breathed a sigh of relief and traded shares of Lululemon up 10.6 percent to $341 in after-hours trading on Wednesday.
In March, McDonald surprised markets with what he warned was a “slower start to the year” in the U.S.
That dynamic is still playing out, but the CEO said the company is working on the necessary fixes in women’s, which will be in place for the second half.
“We’ve seen a slower start to the year due to several internal factors, including missed opportunity in women’s and bags which we are actively addressing and some ongoing choppiness in the consumer environment,” McDonald said. “Looking at women’s, we did not maximize the business in the U.S., which was the result of several missed opportunities, including a color palette and our core assortment, particularly in leggings, that was too narrow. Where we had color, guests responded well. We just needed more as they are looking for additional choices. And we are also out of stock in some of our smaller sizes.
“Our pipeline of innovation and our launch cadence for the second half of 2024 is particularly strong,” he said. “In the U.S., our teams have been making the appropriate adjustments in closing the inventory gaps in terms of color and sizing — our brand awareness remains low, but is growing and our store productivity remains among the best in the industry.”
McDonald maintained that Lululemon still has plenty of growth ahead of it — in its home base in North America and around the world.
But analysts are watching the brand with a new kind of caution, even while it continues to easily outpace many competitors in fashion.
Neil Saunders, managing director of GlobalData, said: “While the [first-quarter] numbers are a little below par by Lululemon’s historic standards, they come off the back of stiff prior-year numbers and are more than respectable in a general retail context. Nevertheless, they indicate that Lululemon is now moving into a different phase of its business model where growth will be strong but will fall short of being spectacular. None of this is a problem, especially as Lululemon is still pushing most of the gains on the sales line to its bottom line.”
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