Lululemon (LULU) earnings Q4 2023

Shares of Lululemon plunged on Friday after the athletic apparel retailer issued disappointing guidance and said it’s seeing soft sales within the U.S., its largest market.

The retailer reported holiday earnings on Thursday evening that topped expectations, but showed that its growth in North America is stagnating.

Here’s how the corporate did in its fourth fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly often called Refinitiv:

• Earnings per share: $5.29 vs. $5.00 expected
• Revenue: $3.21 billion vs. $3.19 billion expected

The corporate’s reported net income for the three-month period that ended Jan. 28 was $669.5 million, or $5.29 per share, compared with $119.8 million, or 94 cents per share, a yr earlier. 

Sales rose to $3.21 billion, up about 16% from $2.77 billion a yr earlier.

Shares of Lululemon closed about 16% lower Friday. As of Friday’s close, shares are down about 21% this yr, significantly underperforming the S&P 500, which is up about 10% in that point.

Like its peers, Lululemon has been grappling with uncertain demand and a slowdown in discretionary spending that is hit the apparel space particularly hard. Investors have watched how Lululemon performs in North America, its largest region by sales, because it laps tougher prior yr comparisons and contends with consumers who’re selecting experiences over goods like clothes and shoes. 

In the course of the quarter, sales rose 9% within the Americas, in comparison with 29% growth within the year-ago period. While Lululemon remains to be growing within the region, the speed has slowed down significantly as Lululemon focuses on expanding internationally.

“As you have heard from others in our industry, there was a shift within the U.S. consumer behavior of late and we’re navigating what has been a slower begin to the yr on this market,” CEO Calvin McDonald said on a call with analysts Thursday. “We view this as a chance to maintain playing offense as we lean into investments that may proceed our growth trajectory. Outside the U.S., our business stays strong.”

McDonald added that each traffic and conversions are down within the U.S. He attributed that to a scarcity of products in sizes zero to 4, key sizes for the U.S. customer base, and never enough colourful items.

Meanwhile, international sales grew 54% on a reported basis, with sales in China growing 78% and 36% in the remaining of Lululemon’s markets.

Comparable sales rose 12% in the course of the quarter, just shy of the 12.3% uptick analysts had expected, based on StreetAccount.

For the present quarter, Lululemon expects net revenue to be between $2.18 billion and $2.20 billion, representing growth of 9% to 10%. Analysts were expecting a forecast of $2.25 billion, or growth of 12.5%, based on LSEG.

It expects diluted earnings per share to be between $2.35 and $2.40, below the $2.55 analysts had expected, based on LSEG.

For the total yr, it expects sales to be between $10.7 billion and $10.8 billion, compared with estimates of $10.9 billion, based on LSEG.

It anticipates diluted earnings per share will probably be between $14 and $14.20 for the yr, in comparison with estimates of $14.13, based on LSEG.

Lululemon has long been one in every of the market leaders for girls’s athletic apparel, however the Vancouver-based company is facing more competition than ever. Newer entrants like Alo Yoga and Vuori have been nipping at Lululemon’s market share, and it’s needed to work harder to set itself apart within the more crowded category. 

The retailer has been working to construct out its footwear offering and grow its men’s business. In the course of the quarter, it opened its first men’s store in Beijing — a key growth marketplace for the corporate. In February, it debuted its first men’s sneaker, CityVerse, and plans to launch recent running styles for each men and girls as performance sneakers proceed to be a brilliant spot in an otherwise stagnant shoewear market. 

Headed into the vacations, McDonald said Black Friday was the “single biggest day” in the corporate’s history and he was “encouraged” by the trends he was seeing initially of the season. However the retailer’s holiday-quarter outlook got here in a bit wanting analysts’ expectations. 

In January, it raised that guidance after it saw sales “balanced across channels, categories, and geographies,” finance chief Meghan Frank said in a news release. 

Read the total earnings release here.