Lululemon Athletica Stock Plunges Nearly 16% Due to Revised Sales Forecast
Lululemon Athletica, a favourite among Wall Street investors, faced a significant setback as its stock, LULU, sharply declined nearly 16% due to a revised sales outlook for 2024. This drop pushed the stock below $400 for the first time in five months, hitting levels not seen since November last year. However, LULU stabilised near the longstanding support level of $386.50 after initially falling to $387.
The company’s reduced revenue guidance for the entire year, coming in $250 million below analysts’ expectations, fueled the negative sentiment among investors. Despite reporting fourth-quarter earnings and revenue that surpassed consensus estimates, Lululemon’s outlook failed to meet market expectations.
The broader market also experienced some turbulence, with slight declines following recent gains driven by Federal Reserve Chair Jerome Powell’s commitment to rate cuts despite signs of inflation in the US economy. While the NASDAQ closed slightly higher, the S&P 500 and Dow Jones recorded losses.
In addition to Lululemon, Nike (NKE) also saw a decline in its stock price, dropping 7% after its earnings report. Nike’s decision to focus on innovative designs and prioritize its wholesale segment contributed to the market’s reaction.
Lululemon’s management provided a subdued outlook for 2024, with projected full-year sales ranging between $10.7 billion and $10.8 billion, falling short of the $11 billion consensus forecast. Similarly, first-quarter sales estimates of $2.18 to $2.2 billion were below analysts’ expectations.
Despite these challenges, Lululemon continued its expansion efforts, opening 25 new stores during the fourth quarter, bringing the total store count to 711. The company reported fourth-quarter earnings per share of $5.29, exceeding consensus estimates by over 5%, while revenue reached $3.21 billion, a 16% increase year-over-year.
A notable highlight was the significant growth in international revenue, which surged by 54% in the fourth quarter. Although same-store sales rose 12% year-over-year, the company faces margin pressure due to increasing selling, general, and administrative costs.
Looking ahead, Lululemon provided a positive outlook for the entire year, with projected GAAP earnings per share in the range of $14.00 to $15.20, surpassing existing consensus estimates. Despite the near-term challenges, the company remains optimistic about its growth prospects and strategic initiatives.
