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Lululemon Q1 tops estimates; U.S. growth slows amid ‘missed’ opportunities

Lululemon ended the first quarter of 2024 with 711 company-operated stores.

Lululemon Athletica Inc. reported first-quarter results ahead of expectations as growth soared internationally but slowed in its largest market, the Americas.

The activewear retailer also announced a $1 billion increase to its stock-buyback program and raised its full-year profit outlook but reported weak guidance for its current quarter.

On the earnings call, CEO Calvin McDonald said the company had a slower start to the year due to several factors, including missed opportunities in women’s and bags, which it is “actively” addressing, and some ongoing “choppiness” in the consumer environment. Its men’s business has maintained momentum, he added.

“When looking at women's, we did not maximize the business in the U.S., which was the result of several missed opportunities including a color palette and our core assortment, particularly in leggings that was too narrow,” McDonald told analysts on the call. “Where we had color, guests responded well. We just needed more as they are looking for additional choices. And we are also out of stock in some of our smaller sizes.”

Lululemon plans to open five to 10 stores in 2024, and 15 to 20 “optimizations.”

“Looking beyond 2024, our real estate opportunities in the U.S. remain significant, and our plans include continuing both of our new store opening program and our optimization strategy,” McDonald said.

Lululemon reported net income of $321.4 million, or $2.54 a share, compared with $290.4 million, or $2.28 a share, in the year-ago quarter. Analysts had expected earnings of $2.40 per share.

Revenue rose 10% to $2.2 billion, just ahead of estimates of $2.19 billion. Americas net revenue increased 3%, while international net revenue increased 35%.

Same-store sales were up 6%. Americas comparable sales were flat. International comparable sales increased 25%.

"In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world,” McDonald stated in the earnings release. “Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment. Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver for our guests in 2024 and beyond."

In May, Lululemon said chief product officer Sun Choe was resigning and that it did not intend to replace her role. (Choe, who had served in the position since September 2018, is headed to VF Corp.’s Vans as global brand president, beginning in late July.)

For the current quarter, Lululemon expects sales of $2.40 billion to $2.42 billion, just below analysts’ estimates. Earnings per share are expected to be between $2.92 and $2.97, lower than analysts had expected.

For the full year, the company expects earnings per share of $14.27 to $14.47, up from its prior outlook of $14 to $14.20. The company maintained its sales forecast of $10.7 billion to $10.8 billion. 

Lululemon ended the first quarter of 2024 with 711 company-operated stores.

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