Lululemon, the athletic apparel retailer handily beat Wall Street’s earnings estimates, but only narrowly topped revenue expectations. Lululemon’s full fiscal-year guidance suggests the company is betting conditions will improve in the second half of 2024.

Lululemon’s earnings

Here is how Lululemon did in its fiscal Q1 compared to what Wall Street was anticipating, based on a survey of analysts by LSEG:

Lululemon’s earnings per share: $2.54 vs. $2.38 expected

Lululemon’s revenue: $2.21 billion vs. $2.19 billion expected

The reported net income for Lululemon for the 3 month ending on April 28 was $321 million, or $2.54 per share. This is less compared to $290 million, or $2.28 per share, a year earlier.  

Sales rose to $2.21 billion, up about 10% from $2 billion a year earlier.

Lululemon’s U.S. market

In a news release, CEO Calvin McDonald touted the “strong momentum” the company is seeing in its international markets and hinted that it needs to do more work in the Americas to grow in the region again.

“We are pleased by the progress we are making to optimize our U.S. product assortment,” said McDonald. “Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver.”

Last quarter, McDonald said the company was seeing consumer dynamics change in the Americas. He added that Lululemon fumbled by not having the right sizes and colors in its stores, which hit sales. As per McDonald those issues continued during the fiscal first quarter.

 Lululemon’s inventory issue

He said Lululemon’s color assortment was too narrow in leggings, and the company was once again out of stock of the sizes its customers wanted. McDonald added the company did not buy enough of the items that consumers demanded, leading to products being out of stock. He said he expects the company to be in a better inventory position in the second half of the year.

Lululemon’s sales growth

Lululemon is still growing in the Americas, but at a much slower pace than last year. During the first quarter of this year, sales in the Americas increased 3%, versus a 17% jump in the year-ago period. Comparable sales were flat from last year.

Across the business, Lululemon’s comparable sales grew 6%, below the 7% uptick that analysts had expected, according to StreetAccount.

Lululemon’s profit forecast

As U.S. growth is slow, Lululemon issued weak guidance for the current quarter. It expects revenue to be between $2.40 billion and $2.42 billion, just below estimates of $2.45 billion, according to LSEG. It guided earnings per share to be between $2.92 and $2.97, compared to estimates of $3.02, according to LSEG.

The company appears to be expecting conditions to improve in the second half of the year. For the full year, Lululemon expects earnings per share to be between $14.27 and $14.47, ahead of the $14.11 that analysts had expected. It is expecting revenue to be between $10.7 billion and $10.8 billion, which is in line with expectations, according to LSEG.

Tough times for Lululemon

Lululemon, still widely considered to be a best-in-class retailer and a market leader, has hit a bit of a rough patch as of late. It recently announced that its longtime Chief Product Officer Sun Choe would be resigning, which also caused it shares to fall. Denim is again coming back as a major trend, raising concern that shoppers may swap athleisure for jeans, which could hit Lululemon’s topline. \

Lululemon shares

Despite the tepid growth, Lululemon’s share price jumped 10% in extended trading on Wednesday. Share price of Lululemon at closing was $338.23. Though Lululemon’s stock is down 40% year to date as of Wednesday’s close. This is becomes investors become concerned about its growth prospects. Lululemon also announced it would add $1 billion to its stock buyback program.

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