Lululemon Stock Rallies Ahead of Q3 Earnings: Retail’s Upbeat

Shares of Lululemon Athletica Inc.($LULU) were trading up on Wednesday ahead of the yoga apparel maker’s third-quarter earnings, lifting retail sentiment.

Lululemon plans to release its third-quarter fiscal 2024 results on Thursday. Wall Street analysts are expecting earnings per share to come in at $2.71 on estimated revenues of $2.36 billion, according to Stocktwits data. The company beat EPS estimates in the past four quarters.

In the second quarter, its comparable sales increased by 2% or 3% on a constant dollar basis.

The company’s stock has rallied over the past week, reaching a six-month high on Wednesday.

In the second quarter earnings release, the company lowered its guidance. It said it expects full-year net revenues to fall between $10.38 billion and $10.48 billion, down from the earlier stated range of $10.7 billion and $10.8 billion. EPS is expected to range from $13.95 to $14.15, below the earlier guidance of $14.27 to $14.47.

The company missed revenue estimates in the second quarter. Its US sales were flat, dragged down by a slowdown in women's clothing and a lack of new products.

Lululemon CFO Meghan Frank said of its Q2 earnings earlier, “Earnings per share exceeded our expectations in the second quarter, driven by better-than-expected gross margin expansion and disciplined execution. As we enter the back half of the year, we remain focused on executing on our near-term priorities while strategically investing for long-term growth.”

Retail sentiment on the stock improved to ‘bullish’ (65/100) from ‘bearish’ (35/100) a week ago. Message volumes increased to ‘extremely high’ from ‘normal’.

LULU sentiment meter and message volumes on Dec 4 as of 3:59 pm ET

Many users see a favorable risk/reward ahead of its earnings release, citing both technical and fundamental factors.

 

Lululemon is a maker of athletic apparel, footwear, and accessories for yoga, running, training, and most other activities.

Lululemon stock is down 32% year-to-date, significantly underperforming the broader retail sector ETF ($XRT), which is up 17%.

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