Lululemon (LULU) is set to report its third quarter results after the closing bell on Thursday as the retailer grapples with slowing sales growth and concerns over increased competition heading into the critical holiday shopping season.
The stock, one of the worst performers in the S&P 500 (^GSPC) this year, has plummeted over 30% as newer brands like Alo and Vuori capture market share with trendier styles and products.
Shares have also significantly underperformed the Consumer Discretionary sector (XLY) , which is up about 27% over that same period.
And although the stock has rebounded from the four-year lows it faced over the summer, analysts have pointed to increased short-level interest as a catalyst — making the long-term fundamental story all the more important.
Here’s what Wall Street expects from the report, according to Bloomberg consensus estimates:
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Revenue: $2.36 billion vs. $2.20 billion in Q3 2023
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Earnings per share (EPS): $2.72 vs. $2.53 in Q3 2023
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Same-store sales: 2.5% year-over-year growth vs 13% in Q3 2023
The company guided to revenue of $2.34 billion-$2.37 billion for the current quarter with earnings per share coming in between $2.68-$2.73.
Same-store sales within North America have been especially hit hard, with consensus expectations pointing to another 2% decline after the metric fell 3% in the second quarter.
“For Lulu, what we’re mostly watching is how are they performing in the US,” Jessica Ramirez, senior research analyst at Jane Hali & Associates, told Yahoo Finance’s Morning Brief. “They had a slowdown in the previous quarter, and we do feel that might continue. They had talked about newness [and] we have seen some newness…but not enough.”
“There still needs newness and there is much more competition around Lulu,” Ramirez continued. “Everyone has talked about Alo and Vuori, but there’s also competition from upstart brands like On and Hoka, and even New Balance has started tapping into apparel.”
Lululemon CEO Calvin McDonald said during the company’s second quarter earnings call in August that the retailer is “fast-tracking” new styles within performance shorts, tops, and track suits.
“We are optimistic that we will begin to see the benefits of these strategies over the upcoming quarter,” he said at the time.
Morgan Stanley analyst Alex Straton, who has an Overweight rating on shares, reiterated the need for “newness” within the company’s portfolio in a note to clients earlier this week.
Straton added investors will also want to see sales in North America are bottoming out and greater outperformance at international stores and the China market to offset domestic weakness.