Shares of Lululemon (LULU) climbed in morning trading after the athleisure retailer raised its outlook for fourth quarter earnings and revenue. While other retailers have reported disappointing holiday sales, Lululemon said its holiday season was stronger than expected.
STRONG Q4 GUIDANCE: Ahead of its presentation at the ICR Conference in Orlando, Lululemon on Monday raised its outlook for fourth quarter earnings per share and revenue. The retailer now expects EPS of $1.72-$1.74 excluding a tax expense, up from its previous estimate of $1.64-$1.67. Revenue is now expected to be $1.14B-$1.15B, up from its prior revenue outlook of $1.115B-$1.125B. Analysts expected EPS of $1.70 on revenue of $1.13B. Total comparable store sales are now expected to be up in the mid-to-high teens on a constant dollar basis vs. its previous outlook of an increase in the high-single to low-double digits on a constant dollar basis. In a statement, Lululemon Chief Executive Officer Calvin McDonald commented that "The momentum in our business remained strong throughout the holiday season, reflecting the ongoing success of our product offerings and our connection with guests around the globe."
WHAT'S NOTABLE: While Lululemon has been investing heavily in expanding its online presence and offering more menswear to entice customers in a highly competitive retail sector, which includes Gap (GPS), Under Armour (UAA) and Nike (NKE), others in the sector have not fared as well during the holiday season. Though the athleisure company said it experienced its biggest day ever for e-commerce on Thanksgiving, which was then surpassed on Black Friday, the company experienced tech glitches ahead of Cyber Monday. On the company's Q3 earnings conference call, COO Stuart Haselden said "Our guests shopped earlier and wanted to get a jump-start on the holiday season."
OTHER RETAILERS: Kohl's (KSS) on Thursday said its sales for the holiday period were up 1.2% compared to growth of nearly 7% during the same period a year ago. CEO Michelle Gass said in a statement the company was pleased with reporting a "very strong holiday" on top of "last year's' exceptional holiday season." She added the retailer saw double-digit sales growth online this past November and December. Macy's (M) also said Thursday that its owned plus licensed same-store sales for the November/December holiday period were up 1.1%, with CEO Jeff Gennette saying that the holiday period began strong, but weakened in the mid-December period "and did not return to expected patterns until the week of Christmas." Macy's cut its outlook for FY18, with Gennette noting that "Our revised guidance is above the expectations we set at the start of the fiscal year, and we expect to deliver our fifth consecutive quarter of positive comparable sales, including 'comping the comp' of the 2017 holiday season." In late December, Amazon (AMZN), which has been gaining share from other retailers, said that it had a "record-breaking" holiday season with more items ordered worldwide than ever before. Amazon customers shopped at record levels from a wide selection of products across every department, it said. "This season was our best yet, and we look forward to continuing to bring our customers what they want, in ways most convenient for them in 2019. We are thrilled that in the U.S. alone, more than one billion items shipped for free this holiday with Prime," said Jeff Wilke, CEO Worldwide Consumer at Amazon, said at the time. Target has looked to take on Amazon's Prime program by offering free two-day shipping on most items with minimum purchase.
ANALYST COMMENTARY: MKM Partners analyst Roxanne Meyer kept a Buy rating and $177 price target on Lululemon after the company's Q4 preannouncement.. The analyst said the SSS increase forecast of mid-to-high teens, driven by "new customer acceleration and strong product acceptance," was better than expected since the outlook may have softened on other "mixed preannouncements" in retail.
PRICE ACTION: In early trading, shares of Lululemon are up 5% to $138.67.