LULU: Lululemon Shares Rise on Strong Holiday Season, Upbeat Guidance

Lululemon’s profit margins have been slipping for the past 3 quarters, as the athletic wear retailer has been struggling to overcome pressure placed on consumer spending by rising inflation. Wall street had expected its struggles to continue, after what had been a 35% share price drop since November 2021. Its latest financial report however has proven these predictions wrong, and brought some joy to investors in the brand.

How’s Lululemon doing?

Lululemon has reported its holiday-quarter sales, which were far better than analysts had expected. Its earnings per share were reported as $4.40 against expectations of $4.26, and its revenue also came in higher than expected at $2.77bn compared to predictions of $2.7bn. Its net income was reported to be $119.8m and its comparable fourth quarter sales had grown by 27%. The retailer also released an optimistic outlook for the future, stating that it expects its full year revenue to be between $9.3bn–$9.41bn – which was also higher than analyst predictions of $9.14bn. The news was enough to send LULU upwards by 12.7% on Wednesday.

The issue of inventory

In months gone by, Lululemon had been struggling with a bloated inventory. Its holiday-quarter report however showed that these issues might be a thing of the past. What’s more is that the retailer did not need to implement discounts to move it either, which would likely have impacted revenues. While the retailer still has to overcome the challenges of inflation-conscious consumers, it looks like it might be in the clear for now.