Lululemon stock rises after company raises profit outlook, shares buyback

Shares of Lululemon ( LULU ) rose more than 10% as the company raised its full-year profit outlook and boosted its share repurchase program by $1 billion.

The company said full-year earnings per share were in the range of $14.27 to $14.47, now in the range of $14.27 to $14.20. It maintained its previously issued full-year revenue forecast of $10.7 billion to $10.8 billion.

The report comes amid investor concerns over the company’s slowing sales growth amid growing competition in the athleisure sector. Newer brands like Aloe and Vuri. Ahead of the earnings release, Lululemon shares are down about 40% to start 2024, making it one of the worst performers in the S&P 500(^GSPC) this year.

“It’s a relief rally you see in the market,” Bernstein senior analyst Aneesha Sherman told Yahoo Finance after the Lululemon release.

While the company benefited from a surge in consumer demand for casual wear during the pandemic, sales growth has slowed in recent quarters. In Q4, revenue grew 16% year-over-year, up from 19% in Q3. In the most recent quarter, Lululemon’s revenue was up 10% from a year earlier.

“LULU has been a significant underdog in our coverage this year due to concerns that upstart rivals such as Aloe and Woori are slowing U.S. growth,” Wedbush analyst Tom Nigick wrote in a May 22 note to clients.

In May, Lululemon announced Sun Chow as its chief product officer Left the company, shares fell 7% on the day the news broke. The departure was a motivator for bears like Jefferies analyst Randall Koenig, who said the company’s product assortment had “declined.”

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In the first quarter, Lululemon’s revenue of $2.21 billion came in just above Wall Street’s estimate of $2.20 billion. Meanwhile, the company’s earnings per share of $2.54 beat Wall Street’s estimate of $2.39.

Comparable sales in North America were flat in the first quarter, which Sherman noted was largely expected, but worries investors moving forward.

“The question is, can they make up for it internationally, and they did this quarter,” Sherman said.

Analysts like Konik are still skeptical that sales outside the U.S. will support revenue growth moving forward.

“US revs continue to slow and share is being lost to Alo and Woori,” Koenig wrote in a research note after the release. “After-hours gains in stocks are unlikely to hold as the future looks bleak, and we believe margins will not be maintained as US momentum fades.”

A Lululemon sign is seen at a shopping mall in San Diego, California, USA on November 23, 2022.  REUTERS/Mike Blake

Lululemon is spotted at a shopping mall in San Diego, California on November 23, 2022. (REUTERS/Mike Blake) (REUTERS/Reuters)

Josh Shafer is a Yahoo Finance reporter. Follow him on X @_joshschafer.

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