Lululemon Athletica Inc. (NASDAQ: LULU)
Earnings
Lululemon Athletica (LULU) reported earnings yesterday morning before the market opened with a 12% decline in quarterly profit that has pushed the company to lower sales guidance for the year. This did not sit well with investors as shares began selling off in the premarket session even though their earnings beat analyst expectations. LULU reported earnings of 38 cents a share on $479.7 million in sales, a nice jump from the same period last year of $419.4 million. However, LULU lowered its top end range for sales from $2.055 to $2.040 and this is the reason investors are punishing share prices, which were down just over 12% premarket at the time of this writing. Analysts polled at FactSet were expecting 37 cents per share on $482.3 million in sales.
Chief Executive Officer Laurent Potdevin had this to say in their earnings conference call,
This solid top line performance is a testament to the continued strength of our brand and loyalty of our guests. Our gross margin and inventory position came in within our expectation for the quarter and we reported EPS of $0.38 per share. In line with microeconomic trends, the start of Q4 has been mixed. We saw lower traffic in the final weeks of Q3 and into the first couple of weeks of Q4, with steady improvement in Thanksgiving. Given the current environment, we’re taking a conservative stance with revenue in Q4, while taking the necessary actions to manage inventory and control expenses. Our work to be a scalable global supply chain is beginning to pay out and we saw an inflection of our product margins beginning in Q4. NASDAQ
LULU has been a bit disappointing this last quarter of the year, down 30% since the beginning of September. We’re going to need a positive catalyst to get this stock turned around so we’ll have to keep an eye on the results of the next earnings release or any news in between. LULU does have a strong brand name in the fitness industry and with the holidays approaching we should see some pick up in demand. I like the company and the brand they’ve built but for now I’ll be on the sidelines until we see increased demand for their products.
LULU Technicals
LULU got absolutely pummeled today following their earnings release. Shares closed Tuesday at $52.16 only to open down Wednesday at $46.94, a 10% decline. Shares quickly bounced back before meeting resistance at the 200 day moving average on the 5 minute chart where it reversed and trended down for the remainder of the day and closed at $45.31. Yesterday was a rough day for LULU investors and it still looks like this stock has some downside potential especially with the market selling off like it has. Look for support around the $44 and $40 levels while resistance will be met at $48 and $50. Every major indicator is pointing south for this stock so it might be best to let the dust settle before looking at buying any shares of LULU.
Looking back on the year, LULU had the look for some promising returns but just couldn’t break that $70 level and had a really hard time holding the $69 level as it tested it multiple times throughout the year just to reject it. Shares churned for most of the year between the $60 and $70 levels before breaking lower in September and it hasn’t looked back since. Shares hit lows for the year in mid November at $43.14, 38% off from the highs, and to put salt in the wound a Death Cross hit the daily chart on September 15. Shares should find some support at $43.14 and then at $36 with resistance at $48 and of course the big $50 mark. Analysts currently have an average price target of $64.33.
About Lululemon Inc.
Lululemon Athletica, Inc. designs and retails athletic apparels primarily in North America and Australia. It offers a comprehensive line of apparel and accessories, including fitness pants, shorts, tops and jackets designed for athletic pursuits such as yoga, running and general fitness. The company operates through corporate owned stores and direct to consumer segments. Its yoga-inspired apparel is marketed under the Lululemon Athletica brand name. lululemon athletica was founded by Dennis J. Wilson in 1998 and is headquartered in Vancouver, Canada. MarketWatch
