Vancouver yogawear seller Lululemon Athletica Inc. (Nasdaq:LULU)'s share price initially fell more than four per cent after hours today despite the company posting a substantial increase in sales in the quarter that ended Oct. 19.
The share-price decline was likely because after markets closed, the company announced weaker than expected sales guidance for its current quarter, which includes the holiday season.
Lululemon's sales in its third quarter, ended Oct. 29, jumped 19 per cent to US$2.2 billion, compared with US$1.86 billion in the same quarter one year ago.
Net income, or profit, for that three-month period was US$249 million, or US$1.96 per share, compared with US$255 million, or US$2 per share, in the same quarter in 2022.
The company said that it expects current-quarter sales to be between US$3.14 billion and US$3.17 billion, which is less than the US$3.18 billion that a survey of analysts expected, according to the financial data house LSEG.
Lululemon is not alone in having expectations for holiday-season sales that are below what might have previously been expected. Retailers, such as Vancouver shoe-seller and Fluevog Shoes CEO Adrian Fluevog, have told BIV that they have seen customers sharply cut back on spending.
"It looks like Lululemon is maintaining its market share, and continuing to see growth in Canada, the U.S. and globally," said Retail Insider owner and retail analyst Craig Patterson.
Lululemon said that its North American revenue increased 12 per cent, while its international revenue was up 49 per cent. It did not provide a dollar values for those regions.
Patterson said he is impressed to see Lululemon continue to increase sales as much as it is, given that they are facing increased competition from upstarts, such as Alo Yoga.
"Look at what Alo is doing right now globally – not just in Canada," Patterson said. "It is opening a ton of stores. I started reporting on Alo in 2022, when they had 13 stores. Now they have got about 80."
Lululemon provided an update for its store count: 686, up a net total of 14 from 672 three months ago.
Most analysts remain bullish on Lululemon, with more than 70 per cent ranking the shares as at least overweight, according to FactSet. The company's share price has outperformed the Nasdaq Stock Exchange so far this year, however, and that has been enough to give some analysts pause.
On Monday (Dec. 4), Wells Fargo analyst Ike Boruchow downgraded Lululemon shares to equal weight, from overweight. Raymond James retail analyst Rick Patel the next day then lowered his rating on Lululemon’s stock to the still-bullish outperform ranking, from being a strong buy.
Lululemon CFO Meghan Frank said the company's third-quarter performance "exceeded our expectations on the top- and bottom-line."
That performance, she said in a statement, "reflects the ongoing strength of our business model and our teams' ability to successfully execute at a high level amid an uncertain macro environment. As we look to the end of our fiscal year and into 2024, we remain focused on driving long-term growth and creating value for all our stakeholders."
The company's CEO Calvin McDonald hailed what he called a "strong" quarter and said he is "energized by the significant opportunities ahead."
Lululemon said the amount of inventory it stocks is down four per cent, compared to the same quarter one year ago. It also reiterated that it has stopped selling Mirror devices, although it will continue to service and support existing customers.
Confidence in its own operations remains strong, as the company's board of directors authorized a US$1 billion stock-buyback allotment.
In the quarter that ended in October, the company bought about 600,000 shares of its own stock, worth about US$210.8 million. It still has US$243.2 million remaining in a previously authorized stock-repurchase program.