Lululemon Stock Rises After Raising Full-Year Earnings Forecast
Lululemon Athletica (LULU) shares rose over 8 percent before of Thursday’s opening bell after the apparel retailer reported better-than-expected quarterly results, upgraded full-year profits expectations due to a better second-half inventory picture, and increased its stock repurchase program.
In the first quarter ended April 28, the sports gear company earned $2.54 per share, far ahead of analysts’ expectations of $2.38. Revenue of $2.21 billion increased 10% from the previous year, above the $2.19 billion Street projection.
The company’s overseas operations boosted the top line, reporting a 35% increase in sales from the same quarter last year, helping to offset slow 3% revenue growth in the Americas, the retailer’s biggest region.
Lululemon expects net sales of $2.40 billion to $2.42 billion in the second quarter, with earnings per share of $2.92 to $2.97, which is lower than experts’ estimates.
MarketWatch.com: “Lululemon Shares Jump on Boosts to Stock Buyback, Profit Forecast.”
However, for the entire fiscal year, the business expects EPS of $14.27 to $14.47, up from its previous prediction of $14 to $14.20.
An additional $1 billion stock buyback is authorized.
During the earnings call with analysts, Chief Executive Officer Calvin McDonald stated that stocking issues related to color and sizing persisted throughout the Americas business in the first quarter, but that the retailer’s inventory position is expected to improve in the second half of the year.
In addition, the firm, which repurchased $296.9 million of its shares in the first quarter, approved an additional $1 billion in stock buybacks, reflecting management’s confidence in the company’s strategy and execution going ahead.
Monitor This Key Chart Level.
Since late March, Lululemon shares have traded in a falling wedge, which is a bullish chart pattern that indicates a probable higher price movement. Indeed, the stock seems set to break above the wedge’s top trendline on Thursday.
Looking forward, investors should watch to see whether the price can recapture the critical $335 level, where shares may face selling pressure from a horizontal line that connects a sequence of price movements over the last 21 months. A closing above this widely monitored mark opens the way for a rally to higher resistance around $387.
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