Lululemon Athletica (LULU) prepares to report for the holiday quarter late Tuesday after narrowing earnings guidance for the period and warning on margins. LULU stock rose slightly.
The Vancouver-based company’s inventory levels will be watched, after an 85% increase in the prior third quarter of 2022.
Shoppers have turned more cautious due in part to rising inflation, which tends to sap monthly budgets.
Estimates: Analysts polled by FactSet expect Lululemon earnings to jump 27% to $4.26 per share. Revenue is also seen climbing nearly 27% to $2.701 billion, as same-store sales rise 24%.
That would mark the third straight quarter of slightly slowing revenue growth.
Results: Check back late Tuesday.
Outlook: Lululemon may offer guidance for the current quarter and full year, including margins. Wall Street forecasts Lululemon earnings will slow to 13% growth in fiscal 2023 after leaping an estimated 27% in 2022.
Shares of Lululemon rose 1% to 321.11 on the stock market today. LULU stock reclaimed the 50-day moving average last week and just topped the 200-day line on Monday.
Lululemon stock remains well below its early-December high. It tumbled in January on the margin warning. There is no buy point so far.
The relative strength line, which tracks a stock’s performance vs. the S&P 500, recently hit a six-month low.
Nike (NKE) edged higher Tuesday, but is below the 50-day line after skidding last week on a sharp drop in gross margins. Foot Locker (FL) gained 2.8%, also below the 50-day line. FL stock crashed last week despite strong earnings due to a weak outlook.
On Jan. 9, Lululemon Athletica updated earnings and revenue expectations for its holiday Q4, which ended in January.
It forecast revenue of $2.66 billion-$2.7 billion, a 25%-27% increase vs. a year earlier. The company previously guided $2.605 billion-$2.655 billion.
Lululemon said it expected Q4 EPS of $4.22-$4.27 vs. $4.20-$4.30 prior. But it saw Q4 margins declining 90-110 basis points vs. its previous guidance for an increase of 10-20 basis points.
Generally, retailers’ product markdowns to clear out excess inventories are weighing on profit margins.
“In Q4, traffic remains strong across both physical and digital channels, and we anticipate delivering another quarter of solid earnings growth consistent with our updated EPS forecast,” Lululemon CEO Calvin McDonald said in the Jan. 9 news release.
The chief executive went on to call 2022 “a strong year” for Lululemon, with major opportunities ahead.
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