The largest increase in Lululemon Athletica Inc. shares since March 2020 occurred after the firm reported quarterly earnings and provided an annual forecast that exceeded analysts’ expectations.
Earnings report cheered by investors
Lululemon’s fiscal fourth-quarter adjusted profits of $4.40 per share above the estimate of $4.25. The company’s adjusted earnings grew at a CAGR of 25% during the past three years.
For the fourth quarter of fiscal 2022, profits per share (EPS) of 94 cents increased from $3.36 in the fourth quarter of fiscal 2021.
The company reported sales of $2.77 billion, above projections of $2.62 billion. On a dollar-for-dollar basis, revenue increased by 33%. In addition, the three-year CAGR for net sales growth was 26%. The company’s revenue growth was primarily fueled by the strong momentum of its business and the positive reception of its goods.
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CFO Meghan Frank said the company’s performance “remained balanced across product category, channel, and geographies.” In addition, she noted that Lululemon remained confident in its ability to provide “sustainable growth and long-term value for all our stakeholders” in the future.
Solid future guidance
The company anticipates a 15% increase in full-year sales to a range of $9.3 billion to $9.41 billion, exceeding the $9.1 billion expert consensus forecast provided by Bloomberg. In addition, the fourth quarter of the fiscal year saw a 30% increase in global revenues, driven by robust sales in both North America and internationally. As a result, the profit outlook was also above projections.
The business anticipates first-quarter sales between $1.89 billion and $1.93 billion, an increase of 18%. In addition, it projected Earnings between $1.93 and $2 for the quarter. According to FactSet, analysts predicted Earnings of $1.84.
Lululemon has sought to minimize the inventory backlog that has hampered operations in recent quarters, but levels remain elevated, up 50 percent from the previous year. Nonetheless, cost pressures are lessening. In contrast to a January prediction of a fall of up to 110 basis points, the adjusted gross margin declined 70 basis points during the quarter. The drop in adjusted gross margin for the year was 150 basis points.
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Moreover, CEO Calvin McDonald aims to double Lululemon’s revenue to $12.5 billion throughout a five-year plan that concludes in 2026. The focus of executives is on expanding foreign operations, direct-to-consumer channels, and the menswear industry.
With yesterday’s spike higher, the stock price surged above the medium-term downtrend line, canceling the bearish trend and starting a new bull market. Thus, the target is at December highs, near $385.
LULU daily chart, source: author´s analysis, tradingview.com