Retail stock under pressure: Lululemon Athletica Inc (NASDAQ: LULU)

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Lululemon Athletica Inc (NASDAQ: LULU) stock fell over 4.6% in the pre market session of 12th December, 2019 (As of 7:41 am GMT-5; Source: Google finance) after the company posted better than expected results for the third quarter of FY 19. During the quarter, the company had opened 19 net new stores and completed six optimizations. Net income for the quarter was $126 million. Capital expenditures were approximately $78 million for the third quarter compared to approximately $73 million in the third quarter last year. The increase is mainly due to store capital for new locations, relocations and renovations and IT and supply chain investment. LULU has ended the quarter with $586 million in cash and cash equivalents, inventory grew 26% and was $627 million at the end of Q3.

LULU in the third quarter of FY 19 has reported the adjusted earnings per share of 96 cents, beating the analysts’ estimates for the adjusted earnings per share of 93 cents. The company had reported the adjusted revenue growth of 22.5 percent to $916.1 million in the third quarter of FY 19, beating the analysts’ estimates for revenue of $899.7 million, according to financial markets data firm Refinitiv. Total comparable sales rose 17% on a constant currency basis in the third quarter ended Nov. 3 while the analysts had expected a rise of 14.39%, according to IBES data from Refinitiv. Square footage rose 18% versus last year, due to the addition of 53 net new Lululemon stores since Q3 of 2018.

Additionally, LULU had repurchased approximately 44,500 shares this quarter at a cost just under $8 million. During 2019, the company had authorized a new $500 million share repurchase plan of which approximately $328 million of authorization remains at the end of Q3.

Lululemon expects to earn in the range of $2.10 and $2.13 per share in the fourth quarter. Analysts on average had expected the company to earn $2.13 per share. The company forecast fourth-quarter revenue to be in the range $1.32 billion and $1.33 billion, also significantly below Wall Street estimates.

For the full fiscal 2019, the company now expects net revenue to be in the range of $3.895 billion to $3.910 billion based on a total comparable sales increase in the mid teens on a constant dollar basis. Diluted earnings per share are expected to be in the range of $4.75 to $4.78 for the full year, based on a 28% effective tax rate.

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