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Lululemon Raises Full-Year Earnings Guidance, Propelling Shares Higher in Pre-market Trading

Lululemon Athletica, known for its premium leggings, has revised its full-year earnings outlook upward on Wednesday following robust fiscal first-quarter results, surpassing Wall Street expectations, with robust sales in China driving growth.

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For the fiscal year 2024, the Canadian company has increased its diluted earnings per share (EPS) forecast to a range of $14.27 to $14.47, up from the previous estimate of $14.00 to $14.20 per share. The revenue projection remains steady at $10.70 billion to $10.80 billion.

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In the first quarter, Lululemon reported earnings per share of $2.54 and revenue of $2.21 billion, exceeding analysts’ expectations of $2.38 EPS and $2.19 billion in revenue.

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Comparable sales rose by 6%, or 7% in constant dollar terms, driven by robust momentum in international markets, particularly mainland China, where comparable sales surged by 33% compared to the same period last year. This strong performance in China offset flat sales in the Americas. Analysts highlighted Lululemon’s strategic focus on expanding its footprint in China to capitalize on less competitive domestic markets and offset sluggish demand in the United States due to inflationary pressures.

During a call with analysts, Lululemon’s Chief Financial Officer Meghan Frank expressed satisfaction with the company’s business in China, emphasizing ongoing strong performance and minimal competitive pressures. CEO Calvin McDonald echoed this sentiment, stating that Lululemon is well-positioned with inventory levels for the latter half of 2024. However, he acknowledged a shortfall in inventory of fresh colors in the women’s leggings segment, identifying it as a missed opportunity.

Following the earnings report, shares of Lululemon (NASDAQ) surged more than 8% in premarket trading. Analysts at BMO Capital Markets noted that investors had anticipated declines in domestic sales, which did not materialize, leading to the stock’s upward movement.

For the second quarter, Lululemon forecasts earnings per share in the range of $2.92 to $2.97 on revenue between $2.40 billion and $2.42 billion, slightly below Wall Street consensus estimates of $3.03 EPS and $2.45 billion in revenue, respectively.

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