Lululemon stock is rising after the company boosted earnings expectations and stock buybacks

Lululemon ( LULU ) stock rose more than 10% in after-hours trading as the company boosted its full-year earnings outlook and raised its stock buyback program by $1 billion.

The company said it now sees full-year earnings per share in the range of $14.27 to $14.47, up from the previous range of $14 to $14.20. It maintained its previous full-year revenue forecast in the range of $10.7 billion to $10.8 billion.

The report came as investors grew concerned about the company’s slowing sales growth amid increasing competition in the sports industry Newer brands like Alo and Vuori. Before the earnings release, Lululemon stock was down nearly 40% to start 2024, making it one of the worst-performing stocks in the S&P 500 (^GSPC) this year.

“It’s kind of a rally that we’re seeing in the market,” Bernstein senior analyst Anisha Sherman told Yahoo Finance after Lululemon’s release.

While the company has benefited from booming consumer demand for casual clothing during the pandemic, sales growth has slowed in recent quarters. In the fourth quarter, revenues rose 16% compared to the previous year, down from 19% in the third quarter. In the most recent quarter, Lululemon’s revenue increased 10% from the previous year.

In May, Lululemon announced its chief product officer, Sun Choe, He was leaving the companyResulting in the stock falling 7% on the day the news broke. The departure fueled an argument in favor of bears like Jefferies analyst Randall Konick, who said the company’s product lineup was “declining.”

In the first quarter, Lululemon’s revenue of $2.21 billion came in just above Wall Street estimates of $2.20 billion. Meanwhile, the company’s earnings per share of $2.54 beat Wall Street estimates of $2.39.

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Comparable sales in North America were flat in the first quarter, which Sherman noted was largely expected but remains a concern for investors going forward.

“The question is, can they make up for it with international championships, and they did that this quarter,” Sherman said.

Lululemon CEO Calvin McDonald said the company has some “missed opportunities” in its women’s clothing lines in the United States. In particular, the narrow color palette of leggings has contributed to slower sales growth, according to McDonald. Conversely, Macdonald noted that male consumers have responded well to new launches in categories such as golf and training.

“Absolutely nothing has changed in terms of the growth potential of this brand, not just internationally, in all markets, but in the United States,” McDonald said.

“This is all under our control. This is all teams have been chasing, and we expect to address a lot of that in the second half of this year,” he added.

Analysts like Connick remain skeptical that sales outside the U.S. can continue to support earnings growth going forward.

“What matters is the continued slowdown in US speed rates and loss of share to Alo and Vuori,” Connick wrote in a research note after the release. “After-hour gains in the stock are unlikely to continue, as the future looks tepid, and we believe spreads will not be maintained as US momentum fades.”

A Lululemon sign is seen at a mall in San Diego, California, US, November 23, 2022. REUTERS/Mike Blake

A Lululemon sign appears at a mall in San Diego, California, November 23, 2022. (Reuters/Mike Blake) (Reuters/Reuters)

Josh Schaeffer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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