Lululemon shares soar 10% as strong holiday sales fuel earnings beat

Earnings

Lululemon beat on the top and bottom line for its fourth-quarter earnings released Wednesday.

Here’s what the retailer reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.85 per share, vs. $1.74 per share
  • Revenue: $1.167 billion, vs. $1.151 billion
  • Same store sales: increased 17 percent, vs. 16.8 percent

Shares of Lululemon soared more than 9 percent in extended trading based on strong fourth-quarter results.

Same-store sales rose 17 percent after adjusting for currency fluctuations, compared with analysts’ projected 16.8%.

The company also issued strong full year earnings guidance of between $4.48 and $4.55 per share, compared to the expected $4.40.

The retailer also announced a $500 million stock repurchase program.

This is an important quarter for the maker of yoga pants and athletic wear, often called athleisure, as it includes the December holidays. In January, the company raised its forecast after ringing up strong holiday sales. Lululemon said it experienced its biggest day ever for e-commerce on Black Friday.

At that time, Lululemon said it would earn between $1.72 and $1.74 per share, excluding a tax expense, up from its previous estimate of $1.64 to $1.67 per share.

Net revenue is expected to reach a range of $1.14 billion to $1.15 billion, with same-store sales increasing in the mid-to-high teens. That outlook is up from its prior fourth-quarter forecast of $1.12 billion to $1.13 billion in revenue.

Analysts are predicting the company will be at the high end of those forecasts.

Investors also will be looking closely at its 2019 guidance. The company hopes to reach $1 billion in sales by 2020. Last quarter, the retailer beat on the top and bottom lines but issued a weak forecast, sparking a selloff.

The Vancouver-based company’s shares are up more than 80 percent over the past 12 months and more than 20 percent year to date, more than double the S&P 500 Retail ETF’s (XRT‘s) growth of about 8.5 percent.

Despite the popularization of casual workplace attire, some analysts are worried about Lululemon’s ability to keep up with the strong earnings growth it has shown. Last week, Wedbush downgraded the stock to neutral from outperform citing the potential for slower margin expansion ahead.

“We see measured guidance as likely, as a turbulent February likely hits LULU just as hard as the rest of retail,” Wedbush said in an analyst note.

Wedbush said they still see Lululemon as best in class among specialty retailers, like competitors Under Armor and Nike.

Lululemon’s expansion into men’s apparel helped revenue growth in the third-quarter, seeing the highest category increases overall.

Earlier this month, Lululemon announced that former Philadelphia Eagles Superbowl quarterback Nick Foles signed on as the brand’s first men’s ambassador.

Lululemon’s stock is up nearly 2 percent on Wednesday.

This is breaking news. Please check back for updates.

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