Lululemon Athletica (LULU) shares moved lower Friday after the high-end leisure apparel group posted stronger-than-expected first quarter earnings and boosted its full-year profit forecast.
Lululemon said it sees fiscal 2023 earnings in the region of $9.42 and $9.57 per share, a 25 cents per share improvement from its prior forecast, on revenues of between $7.61 billion and $7.71 billion.
The Vancouver-based retailer earned an adjusted $1.48 per share on sales of $1.6 billion for the three months ending in April, topping Street forecasts for the eighth consecutive quarter, as it imposed "select price increases" to offset higher input costs and air freight charges that clipped gross margins by around 100 basis points. That said, operating margins were a healthy 16.1%, and close to pre-pandemic levels.
"Unlike many in the industry, we do not use promotional pricing as a lever to drive top line sales," CEO Calvin McDonald told investors on a conference call late Thursday. "Therefore, we are very intentional with our pricing strategies, and we monitor guest response accordingly."
"That said, I remain cautious around increasing prices in this period of uncertainty, and we will continue to monitor and maintain a measured approach toward this strategy," he added.
Lululemon shares were marked 2.4% lower in early Friday trading to change hands at $295.40 each, a move that would leave the stock with a year-to-date decline of around 24.2%.
"Lululemon is one of the few 'softlines' retailers to raise full-year guidance despite macro/supply chain volatility, reaffirming its position as one of the best growth assests in our space," said Morgan Stanley analyst Kimberly Greenberger, who carries and 'overweight' rating with a $303 price target on the stock.
"We continue to believe that current levels offer an attractive entry point, with accelerating underlying momentum, a customer base mostly shielded from macro pressures and 'best in class' margins," she added.
