Lululemon stock (lulu) jumped around 4% on Thursday following the company’s announcement of an increase in its full-year earnings outlook and a $1 billion expansion of its share buyback program. The company revealed on Wednesday that it now anticipates full-year earnings per share to be between $14.27 and $14.47, a slight adjustment from the previous estimate of $14 to $14.20. Despite this change, Lululemon kept its full-year revenue forecast unchanged at a range of $10.7 billion to $10.8 billion.
As concerns regarding the company’s decelerating sales growth in the face of mounting competition from newer sports brands like Alo and Vuori continue to rise, the stock tumbled approximately 40% at the beginning of 2024, making it among the weakest performers in the S&P 500 (^GSPC) this year. Following the earnings release, Bernstein senior analyst Aneesha Sherman commented on the market’s reaction, describing it as a “relief rally.”
While North American comparable sales remained flat in the first quarter, Sherman indicated that this was largely expected but remains a worry for investors moving forward. Sherman emphasized the importance of the company’s international sector in offsetting the stagnation in North America, a feat that Lululemon managed to accomplish during the quarter.
Lululemon CEO Calvin McDonald admitted to missed opportunities in the company’s women’s clothing lines, specifically pointing out the limited color choices in leggings as a factor contributing to the slowdown in sales growth. In contrast, McDonald highlighted the positive response from male consumers to new launches in categories like golf and fitness.
McDonald reassured investors about the brand’s growth potential, emphasizing that the company has the necessary tools to address current challenges. He expressed confidence in the teams working on strategies to boost sales and anticipated significant improvements in the second half of the year.
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