The Retailer’s Sluggish Americas Business Weighed on Guidance

Shares in Lululemon Athletica (LULU) took a hit in after-hours trading following the release of guidance that fell short of analysts’ expectations, primarily due to softness in its Americas business. The Vancouver-based retailer provided an outlook for the current quarter with revenue ranging between $2.175 billion and $2.20 billion, representing top-line growth of 9% to 10%. However, this guidance was below the $2.25 billion sales expected by analysts. Additionally, the company anticipates diluted earnings per share (EPS) for the period to be between $2.35 and $2.40, falling short of the $2.55 consensus view.

Key Takeaways

• Lululemon shares traded sharply lower in extended trading Thursday evening after the company issued guidance that came in below analysts’ expectations amid softness in its Americas business.
• CEO Calvin McDonald said there’s been a shift in U.S. consumer behavior that has led to a slower start to the year.
• The Lululemon share price may find support from an uptrend line and the nearby 200-day moving average around $431.

For the full year, Lululemon expects sales to be between $10.7 billion and $10.8 billion, falling short of analysts’ estimates at $10.9 billion. The company also projects a midpoint diluted annual EPS of $14.10, which is below the Street expectation of $14.13 per share. Despite these figures, Lululemon reported strong earnings of $5.29 per share on revenue of $3.21 billion for the holiday quarter ending Jan. 28, beating analysts’ forecasts.

The company saw a significant jump in international sales, driven by growth in China, while sales in the Americas were up 9% from the previous year but down compared to the 29% growth reported in the same quarter last year. This decline raised concerns about inflationary pressures impacting consumer discretionary spending on essential items.

CEO Calvin McDonald acknowledged the challenges faced by the company, stating that there has been a shift in U.S. consumer behavior leading to a slower start to the year. He highlighted that a lack of sizing and color options had resulted in lower traffic and conversions in the U.S. market.

Since a bullish golden cross formed on the Lululemon chart in early April last year, the price has continued to trend higher. Investors should keep an eye on an uptrend line close to the 200-day moving average around $431 as a potential support area. Failure to hold this level could lead to a decline to longer-term support near $389.

Following the disappointing guidance, Lululemon shares fell 11.1% to $425.77 in after-hours trading, reaching their lowest level since November of last year.

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