Why Is Lululemon Athletica Stock Shooting Higher Premarket Thursday?

Zinger Key Points
  • Lululemon's Q1 earnings show 6% comp sales growth and plans to expand overseas markets from 21% to 50% of revenue long-term.
  • Despite concerns over product chief departure to Vans, Lululemon sees surge in premarket trading on strong performance.

Lululemon Athletica Inc. LULU shares are trading higher in the premarket session on Thursday.

The company reported first-quarter financial results yesterday after the bell, where comparable sales increased 6% year over year, or 7% on a constant dollar basis. 

Check This Out: Lululemon Q1 Earnings: Revenue Beat, EPS Beat, Comps Up 6%, Soft Q2 Guidance And More

U.S. consumers are “still spending, but I think they’re being selective of where they spend and what they choose to buy,” Chief Executive Officer Calvin McDonald said in an interview with Bloomberg

Lululemon anticipates that its overseas markets, currently contributing around 21% of revenue, will eventually constitute 50% of its business in the long run, Bloomberg added.

McDonald mentioned that Lululemon identified “missed opportunities” in its women’s business during the last quarter and is refining its product selection to stimulate demand. Biker shorts and loose-fitting pants proved to be popular items, the report read.

Bloomberg added that Lululemon plans to introduce new legging designs featuring hydrogen yarn in July. The company also aims to appeal to a broader male audience by offering training and golf-related offerings.

In the quarter under review, the company delivered mixed margin performance. Gross margin rose 20 basis points to 57.7%, while operating margin decreased 50 basis points to 19.6%.

Lululemon sees second-quarter revenue in the range of $2.4 billion to $2.42 billion versus estimates of $2.45 billion. The company anticipates second-quarter earnings of $2.92 to $2.97 per share versus estimates of $3.01 per share. Full-year 2024 revenue is expected to be between $10.7 billion and $10.8 billion versus estimates of $10.75 billion.

The company ended the first quarter with $1.9 billion in cash and equivalents. Inventories at the end of the quarter decreased 15% to $1.3 billion.

Lululemon also said its board authorized a $1 billion increase to its stock repurchase program, bringing the total remaining amount under the buyback up to $1.7 billion.

Investor concerns escalated in May following the departure of Lululemon’s product chief, Sun Choe, who assumed the top position at Vans, V.F. Corporation’s VFC struggling skateboarding footwear and apparel brand. McDonald told Bloomberg that no further restructuring is anticipated among senior management.

“This was our planned succession,” he said. “This is a permanent structure, not interim,” Bloomberg added.

Price Action: LULU shares are trading higher by 7.62% to $331.75 premarket at last check Thursday.

Read Next: Lululemon Athletica Recovering From Merchandising Missteps, Says Analyst

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image: Pedro Alvarez  from Pixabay

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