Stock in Lululemon Athletica —one of the best-performing stocks during the pandemic—plunged after the retailer disclosed lower earnings and profits than expected, choosing not to release figures on sales at stores open at least a year.
Lululemon said it earned 22 cents a share from revenue of $651.96 million. Analysts had predicted earnings of 27 cents, and revenue of $695.98 million.
Investors’ hopes were certainly high going into the earnings report. The stock was up 33% year to date through Thursday’s close. Plenty of analysts have been touting the company’s ability to benefit from the pandemic, as consumers focus on health and wellness (and indulge in wearing yoga pants while working remotely).
Although at least one analyst upbeat about the stock warned sales could come in light, some have said it will be a long-term retail winner, and could soon be a $50 billion company.
That appears to have set the bar too high for the company to clear.
Another key issue, though, is that Lululemon said that it wouldn’t provide comparable-store sales results for the quarter, stating that with stores closed, “comps are not currently representative of the underlying trends of its business” and that the numbers aren’t “useful to investors in understanding performance.”
That could raise a few eyebrows. Most retailers have released comparable-sales figures, brutal as some of those metrics have been.
Like many other retailers, Lululemon declined to provide financial forecasts, citing Covid-19.
Lululemon did say that direct-to-consumer sales climbed 68% year over year, and accounted for 54% of revenues, up from just over a quarter of sales in the year-ago period. It also said it had enough cash on hand to meet liquidity needs.
As of Wednesday, the company had 295 stores open. It said in March that it had 491 at the end of its 2019 fiscal year.
The lack of same-store sales figures casts doubt on how well Lululemon is weathering the pandemic, but analysts’ optimism isn’t based on that alone. Many have cited longer-term factors like product innovation and international expansion for their enthusiasm.
The bigger lesson may be for investors who so rapidly piled into coronavirus “winners,” and who have been very willing to bid up growth stories in retail.
Lululemon stock was down 6% to $289.30 in late trading.
Write to Teresa Rivas at teresa.rivas@barrons.com
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June 12, 2020 at 04:08PM
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Lululemon Stock Falls as Earnings Fall Short - Barron's
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