Daily Brief - Lululemon Stretches Profits

TLDR: Lululemon Athletica Inc. did some serious flexing this quarter, raising its profit outlook and beating market expectations, sending its shares up 13% in extended trading.

The yogawear brand now expects its earnings per share to be 27 cents higher than previously forecasted, surpassing average analyst estimates. First-quarter profits, ending April 28, also came in stronger than expected. To sweeten the deal, Lululemon boosted its share buyback program by $1 billion.

Despite a 40% drop in stock price this year, Lululemon's sales met expectations, maintaining its full-year sales guidance at up to $10.8 billion. While first-quarter comparable sales were flat in the Americas, international sales soared 25%, with China leading the charge.

Currently, international sales make up 21% of revenue, but executives see this growing to 50% in the long term.

Despite challenges in the US market, including a dip in foot traffic, Lululemon has seen positive store traffic in Q1. The company’s focus on casual attire continues to pay off post-pandemic, though concerns over slowing growth remain a talking point.

Scenario Spotlight: Buy Lulu?

The chart above shows the historical performance of Lululemon stock on a 2 week horizon, post the 9 previous episodes when the company beat EPS estimates by $0.15 or more.

Market Movers: Response from Lulu's peers

Here is the historical 1 month response from Lulu's peers post the company beating EPS estimates by $0.15 or more:

1. Nike: 3.86%
2. Puma: 2.04%
3. VF Corporation: 1.59%
4. Adidas: 0.63%
5. The Gap: -0.60%
6. Columbia Sportswear: -0.87%
7. Under Armour 'C': -1.36%
8. Ralph Lauren: -2.13%
9. Canada Goose: -4.42%

Earnings Spotlight: DocuSign reports tonight

DocuSign is projected to report revenues of $706.1 million for the upcoming quarter, reflecting a 6.8% year-over-year growth. This anticipated increase is attributed to both the expansion of the customer base and increased revenue from existing customers.

On the earnings side, the consensus estimate for non-GAAP earnings is 79 cents per share, which would represent a 9.7% decline from the same period last year. However, strong margin performance is likely to have positively impacted the bottom line for the quarter.