Lululemon stock jumps on sales forecast, as China’s reopening helps results

Shares rose 13.3% after hours.

Lululemon reported first-quarter net income of $290.4 million, or $2.28 a share, compared with $189.9 million, or $1.48 a share, in the same quarter last year. Revenue jumped 24% to $2 billion, compared with $1.6 billion in the prior-year quarter. Same-store sales rose 14%.

Analysts polled by FactSet expected Lululemon to report earnings per share of $1.96, on revenue of $1.92 billion and a same-store sales gain of 15.4%.

“A meaningful acceleration in our China sales trend, coupled with lower air freight, contributed to our better-than-planned financial performance,” Chief Financial Officer Meghan Frank said in a statement.

For the second quarter, Lululemon said it expected sales of $2.14 billion to $2.17 billion, with earnings per share of $2.47 to $2.52. FactSet estimates called for earnings per share of $2.49, on $2.16 billion in revenue.

Ahead of Lululemon’s results, Raymond James analysts said they expected a strong showing in the company’s North American segment, and stronger international growth led by China, whose economy is reopening from COVID-19 lockdowns.

They also expected continued digital growth, and more expansion in clothing targeted at men. However, they noted that inventories — or a company’s stockpiles of unsold goods — remain high.

Those bloated inventories at Lululemon and elsewhere are a product of reduced demand, as inflation stretches consumer budgets and forces them to prioritize essentials. Retailers have cut prices on clothing and pulled back on orders amid the more suppressed demand environment.

Higher-income consumers, who have been less affected by higher prices for essentials, have made for better-than-expected results at clothing chains like Nordstrom Inc.
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+4.71%
and Urban Outfitters Inc.
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-1.07%.
But beauty-products retailer Ulta Beauty Inc.
ULTA,
-1.46%
and intimates maker Victoria’s Secret Inc.
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-8.72%
have both noted more aggressive discounting.