Athletic retail brands such as Lululemon and Nike have been struggling in recent months due to lower demand and weakening consumer spending. Lululemon put some of these concerns to rest this past week as they reported strong earnings that came in above analyst expectations. First quarter revenue grew 10% from last year coming in at 2.2 billion, this was driven by a 35% increase in international revenue and a slight 3% increase in American sales. Lululemon CEO Calvin McDonald said, “We saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world. Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment.” The remainder of Lululemon’s report was summarized by Sabrina Escobar of Barron’s, “Same-store sales increased by 6% from a year prior, slightly below estimates for a 6.8% increase. Adjusting for foreign exchange fluctuations, same-store sales rose by 7%. Lululemon’s earnings were also strong. The company reported adjusted earnings of $2.54 a share. Analysts were expecting $2.40 a share. Lululemon slightly raised its full-year earnings guidance. It now sees earnings per share ranging between $14.27 to $14.47 for the fiscal year ending in January. Previous guidance called for earnings to range between $14 to $14.20 a share. Analysts had forecast earnings of $14.13 a share. Lululemon sees revenue ranging between $10.7 billion and $10.8 billion for the year, representing growth of 11% to 12% year over year. Wall Street projections call for $10.8 billion in revenue.” In addition to these strong numbers, the company’s board announced that they will be allocating an additional $1 billion dollars towards its stock buyback campaign.
Shares of the company are down 40% year-to-date and analysts are still debating whether or not the share prices have bottomed yet. Some believe that shares of the company have been “unfairly punished” this year and will soon begin to rise, others believe that slower domestic sales and increasing competition mean that shares will continue to underperform in the future. Either way, the earnings numbers just reported by the company give a rather optimistic outlook on the near future.
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