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HomeMarketLululemon Stock Tumbles on Weak Outlook

Lululemon Stock Tumbles on Weak Outlook


David Paul Morris/Bloomberg

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Lululemon Athletica
stock plummeted in after-hours trading following a softer third-quarter print and fiscal year outlook from the athletic wear company.

Lululemon (ticker:
LULU
) posted third-quarter earnings reported under generally accepted accounting principles of $2.00 a share, in line with estimates. Sales rose 28% year-over-year to $1.9 billion, above forecasts for $1.81 billion.

Comparable-store sales increased 14% for the quarter. Analysts surveyed by FactSet were expecting a 19.1% increase, suggesting that consumers pulled back on their shopping more than predicted. That could have had an impact on margins. Gross margins fell 1.3 percentage points to 55.9%, while the adjusted operating margin fell 0.4 percentage points in the quarter.

Another alarm bell for investors was Lululemon’s update on inventory levels. Inventories increased 85% to $1.7 billion in the third quarter compared to the same period last year.

Shares of Lululemon fell 9.3% to $339.22 in after-hours trading, while the S&P 500 earlier finished up 0.8%. Lululemon stock is down 4.3% this year.

For the fourth quarter, Lululemon is expecting net revenue to be between $2.605 billion and $2.655 billion, on the lower end of estimates for $2.655 billion that analysts were forecasting for. The company predicts earnings per share to oscillate between $4.20 and $4.30 next quarter, also on the lower end of estimates for $4.28.

The company also altered its outlook for fiscal 2022. Net revenue will range between $7.944 billion to $7.994 billion, while adjusted earnings per share are expected to be between $9.87 and $9.97 a share. Previous guidance was for net revenue to range between $7.865 billion to $7.940 billion and adjusted earnings per share of $9.75 to $9.90.

“Our ongoing momentum is a testament to our innovative products, deep community relationships, and the hard work and dedication of our talented teams around the world,” said CEO Calvin McDonald. “We are pleased with our early holiday season performance and look forward to all that is ahead for Lululemon.”

Write to Sabrina Escobar at sabrina.escobar@barrons.com

Credit: marketwatch.com

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