Shares of Lululemon rebound as holiday quarter sales surge

Lululemon Tuesday reported strong sales for the holiday quarter, suggesting wealthier shoppers are still buying yoga pants and tops despite rising prices for essentials.

The company also released an optimistic outlook for the new financial year.

Shares of Lululemon jumped about 11% after hours after the report. By Tuesday’s close, the stock was almost unchanged for the year, bringing the company’s market value to $40.87 billion.

Here’s what the company said three month period ended Jan. 29, compared to Wall Street’s expectations based on a Refinitiv poll of analysts:

• Earnings per share: $4.40 adjusted vs. $4.26 expected
• Revenue: $2.77 billion vs. $2.7 billion expected

Lululemon’s fourth-quarter net income fell to $119.8 million, or 94 cents a share, from $434.5 billion, or $3.36 a share, a year ago. Excluding impairment and other expenses related to the acquisition of Mirror and other items, earnings per share were $4.40.

Revenue rose to $2.77 billion from $2.13 billion a year earlier.

Refinitiv estimates that the company expects fiscal 2023 revenue to be between $9.3 billion and $9.41 billion, exceeding Wall Street’s $9.14 billion expectation. The company expects full-year earnings of $11.50 to $11.72 per share, compared to Refinitiv’s estimate of $11.26 per share.

“Looking forward, we remain optimistic about our ability to deliver sustainable growth and long-term value to all of our stakeholders,” said Chief Financial Officer Megan Frank.

The Vancouver-based sportswear retailer said total like-for-like sales for the fourth quarter increased 27%. The metric, also referred to as single store sales, includes sales from stores that have been open continuously for at least 12 months.

“We believe this is one of the few companies in the field that has a very long growth path and is also very visible,” said Rick Patel, managing director of Raymond James.

Patel said his firm, which maintains a strong buy rating on the stock, sees growth potential in Lululemon’s international business and its men’s business, and that the worst of the company’s inventory problems are a thing of the past.

In December, Lululemon said that inventory at the end of the third quarter was up 85% year-over-year. On Tuesday, the company said inventory was up 50% as of the end of 2022.