Lululemon Delivers Weak Q2 Results, Lowers Outlook: Why LULU Investors Shouldn’t Panic Yet

Lululemon Athletica, inc. (LULU) may not have had the second-quarter performance it was hoping for, but the market hasn’t responded with panic yet, and LULU investors shouldn’t either.?

The company acknowledged where it’s falling short and has a plan to turn things around.

Revenue climbed to $2.37 billion, a 7% improvement from this time last year but just shy of the $2.4 billion analyst consensus. This can be attributed to weaker same-store sales than was expected, as sales grew just 2% compared to the nearly 6% increase that was forecasted.

However, Lululemon did deliver on the bottom line. Adjusted earnings per share came in at $3.15 per share compared to the consensus of $2.93 per share.

After this quarter’s disappointing performance, the company walked back its full-year outlook on the top line. The previous net revenue range called for between $10.7 billion and $10.8 billion, which would have been as much as 12% growth year over year. Now, the guidance calls for just $10.375 billion and $10.475 billion - a 9% improvement at the top end of that range.

Earnings guidance has been lowered as well. While the original outlook called for a range of $14.27 to $14.47 per share, that’s been brought down to $13.95 to $14.15 per share.

One of the key takeaways from the Q2 earnings report was that even higher-income shoppers who have traditionally been willing to shell out for Lululemon are being more cautious about their spending.

We’ve also noticed a concerning trend in the company’s recent product roll-outs. Historically, customers have always been excited about the latest Lululemon drop. Recently, that hasn’t been the case. The company even had to pull its newest leggings line from stores just weeks into the release.

Still, experts suggest that these concerns, and the disappointing performance LULU has shown through 2024, are already baked into the stock’s price. It’s down nearly 50% year-to-date.

So, is now the time for investors to sound the alarms, or should you remain patient for the stock to rebound? Don’t play the guessing game - we’ve found 3 things in the VectorVest stock software to help you make your next move.

LULU Has Excellent Upside Potential and Very Good Safety Despite Poor Timing

VectorVest is a proprietary stock rating system designed to save you time and stress while empowering you to win more trades with less. It gives you all the insights you need to make calculated, emotionless decisions in 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT).

Each sits on a scale of 0.00-2.00 with 1.00 being the average. This makes for quick and easy interpretation, but it gets even better. You’re offered a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for LULU:

• Excellent Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It’s a far superior indicator than the typical comparison of price to value alone. LULU has an excellent RV rating of 1.48. After losing 50% of its value this year, the stock is undervalued with a current value of $408.50/share.
• Very Good Safety: The RS rating is a risk indicator. It’s calculated through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. LULU has a very good RS rating of 1.26.
• Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. This is the one thing holding LULU back right now - it has a poor RT rating of 0.80, reflecting its price trend through 2024 thus far.

The overall VST rating of 1.18 is still considered good for LULU, but the stock is rated a HOLD for the time being. If you’re a current investor or looking for an opportunity to trade this stock, get a free stock analysis at VectorVest today for more insights and to transform your trading strategy for the better!

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VectorVest advocates buying safe, undervalued stocks, rising in price. LULU outperformed the analyst consensus on the bottom line for Q2, but revenue was a disappointment as the company’s struggling with sales amidst a challenging environment. The stock itself has excellent upside potential and very good safety, but poor timing is holding it back right now.

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