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Key Takeaways
- Lululemon shares jumped in premarket trading Thursday after the activewear retailer posted better-than-expected quarterly results, raised its full-year profit guidance amid an improved second-half inventory outlook, and boosted its stock buyback program.
- CEO Calvin McDonald said stocking issues had persisted into the first quarter across the Americas business, but noted that he expects the retailer’s inventory position to improve throughout the back half of the year.
- Monitor if the Lululemon share price can reclaim the $335 level, an area where it may encounter selling pressure from a horizontal line linking a series of price actions over the past 21 months.
Lululemon Athletica (LULU) shares jumped more than 8% ahead of Thursday’s opening bell after the activewear retailer posted better-than-expected quarterly results, raised its full-year earnings guidance amid an improved second-half inventory outlook, and boosted its stock buyback program.
In the first quarter ending April 28, the athletic apparel retailer posted earnings of $2.54 per share, comfortably ahead of the $2.38-a-share figure expected by analysts. Revenue in the period of $2.21 billion rose 10% from a year earlier to edge past the $2.19 billion Street estimate.
The top line received a boost from the company’s international business, which reported a 35% jump in sales from the prior year’s corresponding quarter, helping to offset sluggish 3% revenue growth in the Americas, the retailer’s largest market.
Lululemon forecasts net sales in the second quarter of $2.40 billion to $2.42 billion, while expecting EPS of between $2.92 and $2.97, figures that are below analysts’ expectations. For the full fiscal year, however, the company sees EPS of $14.27 to $14.47, versus its earlier forecast of $14 to $14.20.
Additional $1 Billion Stock Buyback Authorized
During the earnings call with analysts, Chief Executive Officer Calvin McDonald said stocking issues related to color and sizing had persisted into the first quarter across the Americas business, but noted that he expects the retailer’s inventory position to improve throughout the back half of the year.
In addition, the company, which repurchased $296.9 million of its shares in the first quarter, authorized an additional $1 billion to its stock buyback program, indicating management’s confidence of the company’s strategy and execution moving forward.
Monitor This Key Chart Level
Lululemon shares have traded within a falling wedge since late March, a bullish chart pattern that signals a potential upward price movement. Indeed, the stock sits poised to break above the wedge’s top trendline on Thursday.
Looking ahead, investors should monitor if the price can reclaim the key $335 level, an area where the shares may encounter selling pressure from a horizontal line linking a series of price action over the past 21 months. A close above this closely-watched level opens the door for a move up to higher resistance around $387.
Lululemon shares were up 8.4% at $334.25 at around 7:15 a.m.ET.
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