Lululemon Reports First Quarter Earnings

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Lululemon Reports First Quarter Earnings

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Athleisure leader Lululemon Athletica (NASDAQ: LULU) reported lower than originally estimated earnings after Thursday’s stock market close, even with e-commerce sales rising. Lululemon stock fell in extended markets after winding up on Thursday with the broader market.

The Company reported earnings per share of $0.22, falling short of the Street’s expected $0.29 per share. The company also missed revenue estimates, reporting $652 million, below the Street’s expected $690.926 million. Myles Udland breaks down as the company’s first-quarter results on The Final Round.

Lululemon has been on a split, rising almost 150% from the March lows. Since the starting of May shares is rising up to 45%. The latest surge sent shares to new all-time highs after connecting in 13 out of 14 sessions.

Lululemon stock fell 6.9% in late trading. Shares closed down 4.7% to 308.12 on the stock market today. LULU stock cleared a 237.59 handle buy point in early- to mid-May and has kept running. Shares are well extended and have no viable buy point currently, Market Smith analysis shows.

Lululemon stock was sauced as retail stocks were sold in the great quantity amid the coronavirus outbreak. The stock fell more than 50% as relentless selling knocked the sector.

17% fall in the Lululemon’s Sale:

The Company reported its fiscal first-quarter sales dropped 17%, as its strong digital business wasn’t enough to set off the losses from its stores being temporarily closed due to the lockdowns of pandemic COVID-19.

A disappointing product assortment in the first quarter resulted in weaker online sales and fewer shoppers in stores, executives told analysts on a conference call. Lululemon did not provide same-store sales figures. Since May 3, some stores have reopened, with 295 back in business as of June 10. As many stores of the company closed in the first quarter.

The company said, as of June 10, 295 of its 489 stores resumed globally, and about 50% of stores in North America. The company expects almost 100% of stores to be open again by the end of June. And so far, in North America, sales at reopened locations are exceeding expectations, management said.

First Quarter Fiscal 2020 Results

  • All of the Company’s stores in North America, Europe, and certain countries in the Asia Pacific were closed for a major portion of the quarter due to the pandemic COVID-19 closures.
  • Net revenue was $652.0 million, a decrease of 17% compared to the first quarter of fiscal 2019. On a constant dollar basis, net revenue decreased by 16%.
  • Direct to consumer net revenue increased by 68% or increased by 70% on a constant dollar basis.
  • Direct to consumer net revenue represented 54.0% of total net revenue compared to 26.8% for the first quarter of fiscal 2019.
  • Gross profit was $334.4 million, a decrease of 21% compared to the first quarter of fiscal 2019.
  • Gross margin was 51.3%, a decrease of 260 basis points compared to the first quarter of fiscal 2019.
  • Income from operations was $32.8 million, a decrease of 75% compared to the first quarter of fiscal 2019.
  • Operating margin was 5.0%, a decrease of 1,150 basis points compared to the first quarter of fiscal 2019.
  • Income tax expense was $5.3 million compared to $34.6 million in the first quarter of fiscal 2019 and the effective tax rate was 15.6% compared to 26.4% for the first quarter of fiscal 2019.
  • Diluted earnings per share were $0.22 compared to $0.74 in the first quarter of fiscal 2019.
  • The Company repurchased 0.4 million shares of its own common stock at an average cost of $172.68 per share.

Due to the impact that COVID-19 is having across the globe, and the rapid and continuous developments, the Company is not providing detailed financial guidance for fiscal 2020 at this time. (Source: BusinessWire)

From the Lululemon’s CEO:

CEO Calvin McDonald said the company is accelerating investments in key growth areas and believes at-home workouts will be important going forward. The company recently launched a service where customers can chat via video with educators about products and home workouts.

McDonald added that the shift to comfort is positive for their brand and that demand for the category has strengthened.

Chief Product Officer Sun Choe said demand for yoga products saw a significant increase as more people work out at home; adding that “sweating from home” is an important new normal.

Amid the shift toward more comfort and less formal wear, the company is launching three new pants style for use outside of the gym. But due to the uncertainty caused by the pandemic, Lululemon has delayed the nationwide rollout of its membership program to next year from this year.

About Lululemon:

Lululemon Athletica is an athletic apparel retailer domiciled in Delaware and headquartered in Vancouver Canada in 1998. Lululemon deals in athletic wear including tops, yoga pants, shorts, sweaters, jackets, hair accessories, bags, yoga mats, and water bottles. The company honors yoga in all its forms by taking practice off the mat. Practice inaction leads to a purposeful life.

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