Lululemon stock drops following earnings, analyst downgrades
Yahoo Finance Live checks out Lululemon shares following its latest earnings report and removal from analysts' conviction buy list.
Video Transcript
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- And my point is Lululemon-- a reverse story from what you were just talking about, Seana-- shares down. Worst day since March 2020. Shares sinking about 13% throughout the day here today following the company's third-quarter earnings release. It was a mixed bag for Lululemon report with beats on the top and bottom line and revenue raising 28% year-over-year, but gross margins coming in lower than expected.
The company also projecting fourth-quarter earnings-per-share and revenue on the low end of Wall Street estimates. Now, analysts were mixed on the stock. Piper Sandler, Goldman Sachs, and Wells Fargo all raising targets, but Goldman Sachs also, Dave, removing the stock from its conviction [? links. ?] Analyst Brook Roach noting that moving forward, accelerated growth and outperformance versus sector may be harder to achieve.
And I think that's the narrative we've heard from a lot of the analysts today is Lululemon's a great company. They've absolutely crushed it. How do you keep crushing it at a consistent basis in this environment? That seems to be what is kind of taking the stock down today and is a little bit the concern.
DAVE BRIGGS: That seems to be the broad takeaway. And, again, they took it from a conviction buy-- still a buy.
- Right.
DAVE BRIGGS: There's still a buy on the stock. And I'm just surprised-- are you shocked at how far shares have fallen on that report? There was a lot to like in that report. Now, granted, inventory's up 85%. One number we didn't talk about, revenue in China up 70% year-to-date, best Black Friday ever in terms of revenue and in-store traffic.
And they talked about their shoe vertical, which just dropped. Haven't even begun to see the upside from that. Again, I just feel like there's a lot more to like in this report than you would be led to believe by that number.
- Sometimes it's about the expectations though, too, right?
DAVE BRIGGS: Yes.
SEANA SMITH: Yeah.
- They say best Black Friday ever, but they still don't-- they come in on the low end of Q4 estimates. That includes Black Friday.
SEANA SMITH: Yeah. And I think a lot of these-- I mean, we've been talking about it so much in terms of this most recent earnings season. A lot of it has to do with expectations going in. And also, so much is being placed on the guidance. So the fact that the guidance fell just a bit short-- third quarter was extremely strong.
Even the commentary from the CEO remained very, very positive throughout that earnings call. But I think just that-- the fact that they felt a little bit short there on guidance-- and the gross margin miss was a big reason why we're seeing that reaction today.
DAVE BRIGGS: The phrase "victim of your own success" comes to mind a little bit here with Lululemon.
