- The sportswear firm stated Thursday it ordered closely to fulfill demand this yr.
- CEO Calvin McDonald would not anticipate to slash costs to clear merchandise.
- Elevated stock, and delicate steerage, probably contributed to a drop within the firm’s inventory value.
Lululemon on Thursday reported an 85% year-over-year improve in stock. However not like different firms that plan to low cost merchandise in an effort to clear bursting stockrooms, the sportswear firm is not anticipating to slash costs.
“Our stock ranges have been too lean final yr, and we made the strategic resolution to construct inventories this yr, which enabled the robust top-line progress we have now delivered,” CEO Calvin McDonald stated on a late Thursday name with inventory analysts.
For the quarter ended October 30, Lululemon reported a 28% improve in quarterly gross sales to $1.86 billion, forward of the $1.81 billion anticipated by analysts, based on FactSet. However the rationalization for the elevated stock and quarterly steerage did not placate traders, with shares falling 7% in after-hours buying and selling inside two hours of the earnings report.
For the present quarter, which ends January 31, Lululemon expects earnings per share between $4.20 and $4.30. Analysts polled by FactSet anticipated $4.30. The corporate expects income between $2.605 and $2.655 billion. Analysts anticipated $2.65 billion.
McDonald stated the vacation buying season is off to a robust begin though the “exterior atmosphere … stays difficult” given ongoing financial uncertainty.
“Black Friday was the most important day ever in our historical past by way of income and site visitors,” he stated, noting the power of a number of merchandise, together with the corporate’s belt bag, outerwear and footwear.
Chief Monetary Officer Meghan Frank stated the corporate expects stock to clear all through the present quarter. She stated unit progress in stock ought to be round 39%, on a three-year compound annual progress fee foundation, by the top of the quarter.
McDonald stated he would not anticipate to chop costs as a way to transfer merchandise quicker, other than typical markdown exercise.
“Nice merchandise, common costs continues to be promoting,” he stated.
McDonald stated the corporate elevated costs on about 10% of its product this yr. However whereas he described it as a “premium model” with “pricing energy,” he would not anticipate to boost many extra.
“What we do not wish to do is react too aggressively and create any impression on the demand for our product,” he stated. “Different (firms) that priced up at the moment are closely discounting and freely giving that perceived achieve.”
