A Lululemon store in New York, US, on Tuesday, March 28, 2023.
Stephanie Keith | Bloomberg | Getty Images
Lululemon reported earnings that beat Wall Street’s estimates on the top and bottom lines Thursday and raised its full-year guidance.
Shares of the company surged 10% in extended trading.
Here’s how the retailer did in its first fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts compiled by Refinitiv:
- Earnings per share: $2.28 vs. $1.98 expected
- Revenue: $2 billion vs. $1.93 billion expected
The company’s reported net income for the three-month period that ended April 30 was $290.4 million, or $2.28 per share, compared with $190 million, or $1.48 per share, a year earlier.
Sales rose 24% to $2 billion, up from $1.61 billion a year earlier.
The retailer now expects to see full year revenue of $9.44 billion to $9.51 billion, up from a previous range of $9.31 billion and $9.41 billion.
The apparel retailer, which sells high-end yoga pants, shoes and other athletic wear, is lapping strong year-over-year sales that came after the company raised its prices.
At the time, Lululemon shoppers were still flocking to its stores and filling up their digital carts and weren’t yet feeling the pressure of persistent inflation.
While the company largely caters to higher-income consumers, who tend to fare better against macroeconomic pressure, retailers across the industry have cited a pullback in discretionary spending and higher-ticket items.
During Nordstrom’s earnings call Wednesday evening, executives noted the high-end customer is “pretty resilient” but they’ve also become more cautious.
During this earnings season, some analysts cautioned soft goods retailers, or those that sell items such as clothes and shoes, could see a drop in margins because of increased promotional activity and an overall pullback across the sector.
The results so far this quarter have been mixed.
Many retailers have benefited from supply chain tailwinds, such as reduced freight costs, that have boosted their margins. But for some, a lot of those savings evaporated because of increased promotions and upticks in shrink, among other headwinds.
That rang true for Foot Locker, but others in the category, including Gap and Urban Outfitters, were able to hold the line on promotions and saw benefits to their margins.
Last month, CNBC reported Lululemon is looking to sell its at-home fitness business Mirror and has approached competitor Hydrow as a potential buyer.
The company announced it would acquire Mirror for $500 million at the height of the at-home fitness bonanza in June 2020 in a bet that people would continue to exercise at home, even after Covid pandemic restrictions ended and gyms reopened.
The segment has since rebranded as lululemon Studio but has been weighing on Lululemon’s balance sheet.
During its previous fiscal quarter, the company said it took $443 million in impairment charges related to Mirror and told investors hardware sales have come in below expectations.
Lululemon acknowledged the at-home fitness market has been under pressure. Similar to Peloton, it has begun pivoting the segment away from being solely hardware-focused.
Read the full earnings release here.
