The busiest part of earnings season may be past, but there are still businesses that are reporting fresh financials. One such company, which had been experiencing strong momentum, just issued an update that disappointed shareholders.
I’m talking about Lululemon Athletica (NASDAQ: LULU). While it beat Wall Street’s earnings and revenue estimates, investors weren’t pleased with some other data points. The top apparel stock was down 16% the day after the announcement, and it has dropped around 20% year to date (as of this writing). That seriously lags the 9% gain of the Nasdaq Composite.
Zoom in
For the three-month period that ended Jan. 28, which was Lululemon’s fiscal 2023 fourth quarter, the business reported revenue of $3.2 billion (up 16% year over year) and diluted earnings per share (EPS) of $5.29 (up 20% when adjusting for the impairment charge a year ago). If this was all the information Lululemon provided, you’d assume that the company was firing on all cylinders. These headline figures exceeded Wall Street expectations.
However, investors were disappointed with some notable trends. For starters, sales in the Americas region increased by 9% in Q4. That was compared to 29% growth in the year-ago period, when it was called the North America segment.
“As you’ve heard from others in our industry, there has been a shift in the US consumer behavior of late, and we’re navigating what has been a slower start to the year in this market,” CEO Calvin McDonald said on the fourth-quarter 2023 earnings call.
Adding more negativity to the mix, the forecast executives provided also fell short of consensus analyst estimates. Projected net sales of $2.2 billion and diluted EPS of $2.40 (both the high end of guidance) in the current quarter weren’t well received by the market.
Zoom out
It’s easy to get caught up with the latest financial results. But for long-term investors, there’s rarely anything that happens in a three-month period that alters the intrinsic value of a business. With that in mind, I believe Lululemon is still a high-quality enterprise. Same-store sales…
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