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Lululemon (NASDAQ: $LULU) Slumps 15%+ After Q423 Earnings Beat on Disappointing Guidance 

Lululemon Athletica Inc. (NASDAQ: $LULU)

Lululemon Athletica Inc. (NASDAQ: $LULU) is a Canadian-American apparel company known for its technical nulu and luon fabrics used to make yoga pants and other sportswear apparel. Founded in 1998, it is based in Vancouver, Canada.  

On March 21, 2024, the company announced its quarter Q4 and fiscal 2023 results, which came in above estimates.

Fourth Quarter Revenue Surpassed Expectations

The company had a great fourth quarter, with revenue up by 16% year-over-year to $3.2 billion and above estimates of $3.21 billion by 0.31% of $3.19 billion. Moreover, the EPS came in at $5.29, surpassing analyst expectations of $5.03 by 5.1%. 

Lululemon Athletica achieved a GAAP profit of $5.29 per share, marking an improvement from its profit of $0.94 per share during the corresponding quarter of the previous year. Net revenue in the Americas increased by 9%, while international net revenue increased by 56% on an FX-neutral basis.   

As for fiscal 2023, the net revenue increased by 19% compared to 2022, amounting to $9.6 billion.  Net revenue in the Americas rose by 12%, while international net revenue surged 58% on an Fx-neutral basis.

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CEO Comments

The company’s CEO, Calvin McDonald, said, “We are pleased with the strong finish to our 2023 fiscal year and continue to be ahead of our Power of Three ×2 strategy. During the fourth quarter, we saw continued momentum across our channels, geographies, and merchandise categories, driven by our teams around the world. As we step into 2024, we are focused on the significant opportunities ahead for lululemon as we navigate the dynamic retail environment and deliver for guests through innovative new products and brand activations

Lululemon Forecasts Slowed Growth 

During the post-earnings call, CEO Calvin McDonald said they had seen a slowdown in sales in North America in the first quarter. He added that the US consumer environment had been challenging., 

The company forecasted revenue for 2024 between $10.70 billion and $10.80 billion, a 10%-11% Y/Y increase, but below analysts’ estimate of $10.90 billion.  

Insider Intelligence analyst Rachel said, “Lululemon’s weaker-than-expected forecast underscores the broader challenges retailers are facing, as persistent price pressures drive shoppers to pull back on discretionary purchases and trade down to cheaper brands.”

Lululemon Stock Performance

As of Friday, March 22, 2024, LULU was trading at $391.08, down by 18.33% from its previous close of $478.84. By late afternoon trading, the loss had shrunk slightly to 15.73%, trading at $403.80 per share. Year-to-date, the stock has lost 20.18% of its value but is still up 52.76% in the past 52 weeks, compared to the 32% gain of the S&P 500 in the same period. 

Lululemon Athletica Inc. (LULU)
Lululemon (NASDAQ: $LULU)

Should You Buy $LULU?

Lululemon’s weak guidance for fiscal 2024 got some investors jittery. However, it has a strong standing in the athleisure segment and has long been a leader in the women’s athletic apparel industry. 

It is currently working to expand its reach into the men’s sportswear segment, with the launch of its first men’s store in Beijing, a key driver of growth. It also recently launched its first men’s sneaker called CityVerse. Consequently, there is room for growth despite mounting pressure from new brands like Vuori and Alo Yoga. 

In short, the demand for Lululemon is still high, and despite the weak guidance, profits are still forecast to grow faster than net sales. For long-term investors, LULU stock is still an attractive option. 

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