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HomeBusinessMarketLululemon stock drops after retailer reports mixed quarterly results, high inventories

Lululemon stock drops after retailer reports mixed quarterly results, high inventories

Lululemon Athletica Inc. inventory slid within the prolonged session Thursday after the athleisure-wear maker reported combined quarterly outcomes and noticed inventories soar.

However, administration for the corporate, throughout a convention name to debate the outcomes, stated they have been comfy with their ranges of unsold items, and stated the state of its warehouses and backroom cabinets left the corporate well-stocked for the vacations.

Chief Executive Calvin McDonald stated in the course of the name that Lululemon’s

core types nonetheless made up round 45% of that stock, and carried “limited seasonal markdown risk.” He added that offer chains have been opening up, and that the third quarter represented “the high point” for its inventories, when measured by greenback quantity.

“As we discussed, our inventory levels were too lean last year, and we made the strategic decision to build inventories this year, which enabled the strong top-line growth we have delivered,” he stated.

The retailer, in its earnings launch previous to the decision, stated it ended the third quarter with inventories up 85% to $1.7 billion, in contrast with $900 million on the finish of the third quarter of 2021.

“The company believes its inventories are well-positioned to support its expected revenue growth in the fourth quarter,” it stated in a press release.

Lululemon earned $735 million, or $2 a share, within the third quarter, in contrast with $541 million, or $1.44 a share, in the identical quarter final yr. Adjusted for one-time objects, Lululemon earned $1.62 a share.

Revenue rose 28% to $1.9 billion, the corporate stated. Same-store gross sales have been up 22%.

Analysts polled by FactSet anticipated Lululemon to earn $1.97 a share on income of $1.81 billion. Same-store gross sales have been anticipated to rise 19.1%.

“We are proud to have delivered another quarter of strong sales and earnings growth, despite an operating environment that remains dynamic,” Chief Financial Officer Meghan Frank stated within the launch.

Lululemon forecast fourth-quarter income between $2.605 billion and $2.655 billion, and adjusted earnings per share between $4.20 and $4.30.

For the complete yr, the corporate expects income between $7.944 billion and $7.994 billion, and adjusted EPS between $9.87 and $9.97. FactSet consensus requires EPS of $9.92 on gross sales of $7.935 billion.

Shares fell 7.5% after hours Thursday. In the sooner stretches of after-hours commerce, they have been down as a lot as 10%.

Analysts have been comparatively upbeat about Lululemon heading into the outcomes, saying the corporate was capable of preserve its costs larger, even whereas different retailers reduce theirs as dearer necessities reshape shopper demand, leaving clothes and different items caught in packing containers in warehouses.

Retailers have slashed costs on clothes in an effort to clear cabinets and entice prospects. But Raymond James analysts, in a observe this week, stated they discovered that Lululemon “didn’t have broad-based promotions” within the third quarter, or the fourth quarter to this point.

They stated that the corporate leaned on its “We Made Too Much” part to iron out its inventories. And they famous a bounce in downloads for Lululemon’s app. However, they stated enterprise in China “could be a curveball” amid that nation’s COVID-19 restrictions.

Piper Sandler analysts, in October, additionally stated that Lululemon remained more insulated than different clothes retailers from large markdowns.

Lululemon inventory is down 4% to this point this yr. The S&P 500 Index
by comparability, has slid 17% over that point.

Claudia Assis in San Francisco contributed to this report.



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