Lululemon Athletica drops 3% after failing to raise guidance despite earnings beat

Investing.com -- Lululemon Athletica reported fiscal third-quarter results that topped Wall Street estimates, but the athletic apparel maker's revenue guidance for the holiday season quarter fell short of estimates.

Lululemon Athletica Inc (NASDAQ: LULU) fell more than 2.5% in pre-market Friday following the results.

The company reported adjusted EPS of $2.53 on revenue of $2.2 billion. Analysts polled by Investing.com anticipated EPS of $2.28 on revenue of $2.19B.

Comparable sales increased 13%, with direct-to-consumer net revenue up 18%. Gross margin increased 110 basis points to 57%.

For Q2, the company sees diluted EPS in the range of $4.85 to $4.93, in-line with estimates of $4.93 per share and revenue in the range of $3.14B to $3.17B, missing estimates of $3.18B.

On Nov. 29, the company approved an additional stock buyback program for up to $1B.

Oppenheimer analyst Brian Nagel said the results suggest the company is "resilient amid macro pressures."

"Looking closer into 2024, we are now even more upbeat upon nearer-term fundamental prospects for LULU, particularly as macro pressures continue to abate, and the likelihood of investors to award shares a higher multiple, more reflective of the company’s superior fundamental prowess," he said.

Lululemon is a Top Pick within Oppenheimer's Consumer Growth & eCommerce research coverage.

Bernstein analyst Aneesha Sherman said investors are likely disappointed that LULU didn't raise FY guidance after the Q3 beat.

While Sherman remains Market Perform-rated on LULU stock "given the run-up in valuation since October," she lifted the price target by $34 to $400 per share to reflect the recent S&P500 index inclusion.

Additional reporting by Senad Karaahmetovic

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