Lululemon (LULU) Q4 2023 earnings

• Earnings per share: $5.29 For an expected $5.00
• Revenue: $3.21 billion versus $3.19 billion expected

The company's reported net income for the three-month period ended Jan. 28 was $669.5 million, or $5.29 per share, compared with $119.8 million, or 94 cents per share, a year earlier.

Sales rose to $3.21 billion, up about 16% from $2.77 billion the previous year.

Shares fell about 10% in extended trading Thursday.

Like its peers, Lululemon has been grappling with uncertain demand and a slowdown in discretionary spending that has particularly hurt the apparel space. Investors have watched Lululemon's performance in North America, its largest region by sales, as it draws tougher comparisons to the previous year and competes with consumers who choose experiences over goods such as clothing and shoes.

During the quarter, sales rose 9% in the Americas, compared to 29% growth in the same period last year. While Lululemon is still growing in the region, the rate has slowed significantly as Lululemon focuses on expanding internationally.

Meanwhile, international sales grew 54% on a reported basis, with sales in China growing 78% and 36% in the rest of Lululemon's markets.

Comparable sales rose 12% during the quarter, slightly less than the 12.3% increase analysts expected, according to StreetAccount.

For the current quarter, Lululemon expects net revenue to be between $2.18 billion and $2.20 billion, representing growth of 9% to 10%. Analysts were anticipating a forecast of $2.25 billion, or 12.5% ​​growth, according to LSEG.

It expects diluted earnings per share to be between $2.35 and $2.40, less than the $2.55 that analysts expected, according to LSEG.

For the full year, it expects sales to be between $10.7 billion and $10.8 billion, compared with estimates of $10.9 billion, according to LSEG.

It expects diluted earnings per share to be between $14 and $14.20 for the year, compared with estimates of $14.13, according to LSEG.

“As you have heard from others in our industry, there has been a shift in American consumer behavior recently and we are dealing with a slower start to the year in this market,” CEO Calvin McDonald said by phone. With analysts on Thursday. “We view this as an opportunity to continue to play offensively while relying on investments that will continue our growth trajectory. Outside of the U.S., our business remains strong, and all of our international markets are in Canada.”

McDonald added that traffic and conversions were down in the US, which he attributed to a shortage of products in sizes zero to four, the main sizes for the US customer base, and not having enough colorful items.

Lululemon has long been one of the leaders in the women's activewear market, but the Vancouver-based company faces more competition than ever. New entrants like Alo Yoga and Vuori were eating away at Lululemon's market share, and it had to work harder to differentiate itself in the more crowded category.

The retailer is developing its footwear offerings and growing its men's business. During the quarter, it opened its first men's store in Beijing – a key growth market for the company. In February, it debuted its first men's sneaker, the CityVerse, and plans to launch new running styles for both men and women as performance sneakers remain a bright spot in a stagnant footwear market.

With the holidays approaching, McDonald said Black Friday was the “biggest day” in the company's history, and he was “encouraged” by the trends he was seeing at the beginning of the season. But the retailer's holiday quarter forecast came in slightly lower than analysts' expectations.

It raised that guidance in January after seeing sales as “balanced across channels, categories and geographies,” CFO Megan Frank said in a press release.

Read the full earnings release here.