Lululemon (Lulu stock) shares plummeted on Friday as the high-end athletic clothing retailer predicted a weaker holiday season. This was partly due to a pullback in consumer spending, which obscured an otherwise excellent earnings report for the company’s third quarter.
Lulu Stock Price Projection
According to Lululemon’s statement, the company anticipates earning between $4.20 and $4.30 per share for the January quarter, with revenues from $2.61 to $2.65 billion. The top end of both figures matched the projections made by Wall Street analysts. However, they were hampered partly by a massive buildup in inventories, which increased by 84.5% from the previous year to almost $1.7 billion.
Revenues for the whole year were projected to be between $7.944 billion and $7.994 billion, a slight increase from its previous estimate. This was partly based on an e-commerce growth rate of almost 30% from the previous year’s levels.
Lululemon (NASDAQ:LULU) exceeded the expectations of Wall Street analysts by four cents by reporting a bottom line of $2 per share for the three months that ended in October. The company also reported that its revenues increased by 28% to $1.9 billion, thanks partly to record Black Friday sales and solid e-commerce gains.
CFO Meghan Frank told investors on a conference call late Thursday that the holiday season is off to a good start with solid traffic over the extended Thanksgiving weekend and a positive guest response to our holiday merchandise assortment. “In addition, we’re in a much better inventory position this year to meet guest demand,” Frank said. “The holiday season is also off to a good start with strong traffic over the extended Thanksgiving weekend.”
She continued, “However, I also want to acknowledge that we have several large volume weeks ahead of us, and our teams remain focused on connecting and engaging with our guests.” “The environment remains dynamic, and we still have approximately two-thirds of the quarter ahead of us,” she said. “The environment remains dynamic, and we still have approximately two-thirds of the quarter ahead of us.”
In trading that began early on Friday, shares of Lululemon were marked 9.2% down to change hands at $340.18 per. This move would bring Lulu stock’s year-to-date drop to almost 14% if it were to continue.
“Lululemon’s results reinforce our view that brand strength and product newness, coupled with a broader shift toward the casualization of apparel, are enabling it to navigate a challenging environment better than most peers,” said KeyBanc Capital Markets analyst Noah Zatzkin, who carries an “overweight” rating on the stock and has a price target of $375.00 on the stock. Zatzkin has a $375.00 price target on the stock.
Additionally, he stated, “Long-term, we continue to see opportunity in product innovation and foreign growth, and we remain confident in management’s ability to execute on its (growth strategy).”
Featured Image: Unsplash @ Marco Tjokro
