Lululemon shares fall as retailer gives tepid holiday outlook despite strong start to shopping season

Black Friday customers at a Lululemon retailer on the Garden State Plaza in New Jersey.

Mike Calia | CNBC

Lululemon on Thursday mentioned it noticed strong third-quarter demand and a constructive start to the holiday shopping season, however the retailer’s shares fell in prolonged buying and selling after it gave a tepid fourth-quarter outlook.

Here’s how the corporate did in its third fiscal quarter:

  • Earnings per share: $2.53 adjusted. It wasn’t instantly clear if the figures have been comparable, with what Wall Street was anticipating, primarily based on a survey of analysts by LSEG
  • Revenue: $2.20 billion vs. $2.19 billion anticipated

The firm’s reported internet earnings for the three-month interval that ended October 29 was $249 million, or $1.96 per share, in contrast with $255 million, or $2 per share, a 12 months earlier. 

Sales rose to $2.2 billion, up about 19% from $1.86 billion a 12 months earlier.

During the quarter, gross sales jumped 12% in North America and 49% internationally however the retailer’s holiday steerage got here in gentle of expectations. Lululemon mentioned it is anticipating gross sales to be between $3.14 billion and $3.17 billion for the fourth quarter, which is shy of the $3.18 billion analysts had anticipated, in accordance to LSEG, previously identified as Refinitiv.

It expects earnings to be between $4.85 and $4.93 per share, in contrast to estimates of $4.80 to $5.19, in accordance to LSEG. For the complete 12 months, Lululemon expects gross sales to be between $9.55 billion and $9.58 billion, in contrast to estimates of $8.11 and $9.90 billion, in accordance to LSEG.

“We’re happy with the traits we have seen on the start of the holiday season. That being mentioned, the vast majority of the quarter stays in entrance of us,” finance chief Meghan Frank mentioned on a name with analysts. “We stay conscious of the uncertainties within the macro surroundings and we proceed to plan a enterprise for a number of eventualities.”

Shares fell about 3% in prolonged buying and selling.

On a name with analysts, McDonald mentioned Black Friday this 12 months was the “single greatest day” within the firm’s historical past. He added that Lululemon is “inspired” by the traits it has seen on the start of the holiday season.

“As we enter the holiday season, we’re happy with our early efficiency and are well-positioned to ship for our visitors within the fourth quarter,” McDonald mentioned in a information launch. “I’m energized by the numerous alternatives forward.”

During Lululemon’s third quarter, whole comparable gross sales have been up 13%, increased than the 12.4% leap that analysts had anticipated, in accordance to StreetAccount. Comparable gross sales on the retailer’s shops got here in at 9%, decrease than the 11.7% Wall Street anticipated.

But comparable direct to shopper gross sales spiked 18%, increased than the 16.9% analysts had anticipated, in accordance to StreetAccount.

Lululemon incurred $72.1 million in impairment prices associated to Mirror, the related health firm it acquired for $500 million through the pandemic that it is now winding down. Those prices add to the $443 million in impairment prices that the corporate reported earlier this year for the gear.

As a part of a new partnership with former rival Peloton, Lululemon will not promote the Mirror machine or produce content material for its Studio app. Instead, Peloton will present the entire content material for Lululemon’s app and in flip, the retailer will develop into Peloton’s main athletic attire accomplice.

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