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Fitness Stock Lululemon Falls On High Luxury Fitness Apparel Inventory For The Holidays

Fitness stock Lululemon (LULU) sold off in extended trading Thursday after the apparel company beat quarterly expectations but warned of higher inventories.


In fiscal third-quarter results released Thursday after the close, LULU reported $1.86 billion revenue, up 28% from $1.45 billion in the third quarter of 2021. Earnings per share of $2 climbed 23% from $1.62 during the same year-ago period.

Analysts polled by FactSet estimated $1.97 a share on sales of $1.81 billion. But the company mentioned a higher level of inventory going into the holiday season. Shares slid 7% after hours, sending the stock below its most recent buy point at 370.56.

Same-store sales rose 14%, or 17% on a constant-dollar basis. Analysts had expected a 19.1% increase, according to FactSet. Total comparable sales rose 22%, with a 31% rise in direct-to-consumer sales.

Lululemon also gave a new forecast for the full year. It expects revenue of $7.944 billion to $7.994 billion. And earnings per share are expected to be $9.87 to $9.97, excluding the gain on the sale of an office building.

Three months ago, it forecast $7.865 billion to $7.940 billion revenue and earnings per share of $9.82 to $9.90.

Fitness Stock Is Sector Leader

Lululemon, an IBD Sector Leader, ranks first in the apparel retail group, which is seventh among IBD’s 197 industry groups.

Other stocks in the group include Buckle (BKE), TJX (TJX), Ross (ROST) and Gap (GPS).

More mutual funds have been buying shares of the fitness stock over the past three quarters, and now own 58% of Lululemon shares outstanding. Among ETFs owning LULU are Global X Health and Fitness ETF (BFIT) and AdvisorShares Alpha DNA Equity Sentiment ETF (SENT).

Lululemon Athletica makes athletic apparel and footwear for yoga, running, and workouts. In April, the fitness stock revealed a five-year growth plan that should double its 2021 revenue of $6.25 billion to $12.5 billion by 2026.

The Vancouver-based company launched Lululemon Studio, a fitness platform, in September. The studio offers fitness content, products and early access to Lululemon events. Lululemon operates 40 stores in eight countries in Europe and has an EU website. It also opened its first Spanish stores in Madrid and Barcelona in July. In March, the athletic wear leader made a foray into footwear.

The company acquired Mirror in June 2020 at the height of the pandemic, for $500 million. Mirror provides at-home workout equipment and a monthly subscription service. Mirror is the only acquisition so far for the company.

Please follow VRamakrishnan @IBD_VRamakrishnan for more news on growth stocks.


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