Lululemon Athletica has experienced a notable rise in its stock price early on Friday, with shares climbing 4.5% in premarket trading. This uptick comes in the wake of the company’s recent announcement regarding a revised outlook for its full-year earnings. As Chief Executive Calvin McDonald shared, Lululemon aims to expedite the rollout of several new athletic apparel styles, responding to both market demands and internal strategies aimed at boosting growth and innovation. The retailer has now adjusted its earnings per share (EPS) expectations for fiscal 2024, predicting a range between $13.95 and $14.15.
This adjustment reflects a drop from the previous guidance of $14.27 to $14.47. Revenue projections have also been recalibrated, with estimated figures ranging from $10.38 billion to $10.48 billion, down from prior estimates of $10.7 billion to $10.8 billion. Industry analysts, as reported on Capital IQ, forecast a GAAP EPS of $13.76 alongside an anticipated revenue of $10.48 billion. Truist Securities, in their analysis, noted that the positive stock performance indicates a reaction to what they perceive as "overly depressed" expectations among investors prior to the company’s quarterly results.
Notably, Lululemon’s stock is down 49% year to date, leading to questions regarding its growth trajectory. However, the brokerage expressed optimism in their client communication, highlighting that management appears to be focusing on increasing the variety of styles offered, which could prove to be a critical factor in rekindling growth. During an earnings call held late Thursday with analysts, McDonald elaborated on the company’s strategies for the future.
He mentioned that Lululemon is "fast-tracking" numerous new styles within its performance shorts, tops, and track suits, aiming for a robust lineup for 2025. McDonald conveyed optimism that these strategic initiatives would start yielding benefits in the upcoming quarters, anticipating a return to historical levels of product innovation by spring 2025. A significant component of McDonald’s near-term strategy involves enhancing Lululemon’s capabilities in "chase and fast-track design".
This strategic pivot is particularly focused on diversifying the women’s apparel assortment, catering to shifting consumer preferences and trends. Truist, in their analysis, suggested that the strong response to Lululemon's adjusted projections indicates that market sentiment surrounding the company may have finally reached its nadir. In terms of performance metrics, during the quarter that ended on July 28, the retailer reported a net income increase to $3.15 per share, up from $2.68 per share the previous year, thus exceeding market expectations of $2.92.
Revenue for the same period registered a 7% year-over-year growth, amounting to $2.37 billion, albeit missing analysts’ estimates of $2.41 billion. Sales within the Americas showed a modest increase of 1%, while international revenues surged by an impressive 29%. Chief Financial Officer Meghan Frank attributed the increase in EPS primarily to a robust gross margin.
During the earnings call, she expressed satisfaction with the company's expense management strategy, emphasizing the balance between long-term investments and prudent financial management. Looking forward, Lululemon anticipates an EPS range of $2.68 to $2.73 for the third quarter, alongside revenue expectations of $2.34 billion to $2.37 billion.
In contrast, the consensus among analysts is for a GAAP EPS of $2.68 and projected revenue of $2.36 billion. As of the latest market data, Lululemon's stock is priced at $270.58, reflecting a change of +11.57, which translates to a percent change of +4.47. This performance underscores the market's evolving stance on the company amidst varying growth outlooks and strategic direction..