Lululemon Athletica Inc., a prominent retail company known for its athletic apparel, faced a significant setback in after-hours trading on Thursday, witnessing an 11% decline in its stock value. This decline came despite the company’s impressive quarterly results, which exceeded analysts’ revenue and earnings estimates.
In the fiscal fourth quarter, Lululemon reported a substantial increase in net income, reaching $669.5 million, or $5.29 per share. This marked a notable improvement compared to the same quarter in the previous year when net income stood at $119.8 million, or 94 cents per share. The company’s revenue also saw a robust growth of 16%, reaching $3.21 billion, up from $2.8 billion in the year-ago quarter.
Lululemon’s Chief Executive Officer, Calvin McDonald, expressed confidence in the company’s future prospects, emphasizing their commitment to capitalizing on significant opportunities in the dynamic retail landscape. McDonald highlighted their focus on delivering innovative new products and engaging brand activations to cater to the evolving needs of their customers.
The company’s gross profit witnessed a commendable increase of 25% to $1.9 billion, with adjusted gross profit soaring by 20% to the same figure. Despite these positive financial indicators, Lululemon provided first-quarter sales guidance ranging from $2.18 billion to $2.2 billion, falling short of analysts’ expectations of $2.26 billion. Similarly, its fiscal year sales projection of $10.7 billion to $10.8 billion missed analysts’ estimates of $10.94 billion.
Analysts from UBS had anticipated this outcome, suggesting that Lululemon’s first-quarter guidance might be “soft,” with a “low probability” of the company’s full-year guidance exceeding expectations. They foresaw a scenario where the company’s fiscal year 2024 guidance aligns with market expectations but results in a decline in the stock price due to a weak outlook for the first quarter.
Despite the disappointment in guidance, Lululemon’s shares have shown remarkable resilience over the past year, posting a significant gain of 55%. This outperformance has been notable against the backdrop of the broader market, with the S&P 500 index registering a 33% increase during the same period.