LULU
Lululemon Athletica (NASDAQ: LULU) saw its premarket shares surge over 8% on Wednesday after the company elevated its full-year earnings forecast following stellar fiscal first-quarter results. The iconic Canadian brand, renowned for its high-priced leggings, credited robust performance in China for the impressive returns.
For the 2024 fiscal year, Lululemon has revised its diluted earnings per share (EPS) estimate to a new range of $14.27 to $14.47, up from the previous projection of $14.00 to $14.20. The company upheld its revenue forecast between $10.70 billion and $10.80 billion, even as it reported an EPS of $2.54 and revenue of $2.21 billion for the first quarter. Wall Street had forecasted lower figures, anticipating an EPS of $2.38 on revenue of $2.19 billion.
Comparable sales saw an increase of 6%, or 7% when adjusted for constant dollar terms, with "strong momentum in our international markets," as highlighted by the company. Notably, mainland China emerged as a significant contributor, with comparable sales leaping by 33% year-over-year, counterbalancing a flat top-line performance in the Americas. Analysts have observed that Lululemon is expanding its footprint in China to leverage the relatively subdued domestic competition and counterbalance the waning demand from U.S. consumers constrained by inflation.
"From a China standpoint, we're very pleased with our business in that market," commented Chief Financial Officer Meghan Frank on an analyst call. "While we closely monitor the competitive landscape, we still consider ourselves in the early stages of growth in this region, with no imminent concerns."
Chief Executive Calvin McDonald echoed the optimism, stating that Lululemon is in a "more optimal" inventory position as it heads into the latter half of 2024. He did, however, acknowledge a "missed opportunity" in not stocking sufficient fresh colors for their key women's leggings line.
Analysts at BMO Capital Markets suggested that the lack of domestic U.S. declines, coupled with a clean inventory status, likely buoyed investor confidence, propelling the shares higher.
Looking ahead to the second quarter, Lululemon projects its earnings per share to land between $2.92 and $2.97, with revenue ranging from $2.40 billion to $2.42 billion. This outlook falls short of Wall Street's anticipation of $3.03 per share on $2.45 billion in revenue, but the positive developments in international markets seem to have positively offset these concerns for now.
