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Lululemon Athletica (NASDAQ: LULU) stock dropped 15.8% on Friday, following the activewear specialist's release on the prior afternoon of its report for the fourth quarter of fiscal 2023, which ended Jan. 28. (You read these numbers correctly -- fiscal year 2023 includes about a month of calendar year 2024.)
The stock's decline is attributable to guidance, not to the fourth-quarter's results. Management's outlook for the first quarter and full year of fiscal 2024 was lighter than Wall Street had expected for both revenue and earnings. The fourth-quarter's results, on the other hand, beat the analyst consensus estimates for the top and bottom lines.
For some time, consumers have been cutting back their spending on apparel and other discretionary products due in part to uncertainties about the macroeconomic environment. They've also been shifting their disposable income spending more toward services and experiences since the pandemic subsided. Up until now, Lululemon has managed to perform very well despite the challenging macro environment for its industry. However, its fourth-quarter results in its core Americas market and its outlook suggest the company hasn't fully escaped the macro headwinds that others in its industry have been facing in recent years.
Lululemon's key quarterly numbers
| Metric | Fiscal Q4 2022 | Fiscal Q4 2023 | Change |
|---|---|---|---|
| Revenue | $2.772 billion | $3.205 billion | 16% |
| GAAP operating income | $314.4 million | $913.9 million | 191% |
| Adjusted operating income | $785.3 million | $913.9 million | 16% |
| GAAP net income | $119.8 million | $669.5 million | 459%* |
| Adjusted net income | $562.5 million | $669.5 million | 19%* |
| GAAP earnings per share (EPS) | $0.94 | $5.29 | 463%* |
| Adjusted EPS | $4.40 | $5.29 | 20%* |
Data source: Lululemon. GAAP = generally accepted accounting principles. Fiscal Q4 2023 ended Jan. 28, 2024. *Calculations by author.
Adjusted gross margin was 59.4%, up from 57.4% in the year-ago period.
Wall Street was looking for adjusted EPS of $5.00 on revenue of $3.19 billion. So Lululemon surpassed both expectations. It also topped its own guidance, which was for revenue of $3.135 billion to $3.170 billion and adjusted EPS of $4.85 to $4.93.
Year-over-year revenue growth was driven by a 12% increase in comparable sales plus the opening of new stores over the year. Company-operated same-store sales rose 5% and e-commerce revenue jumped 17%. Lululemon opened 25 net new stores in the quarter, bringing its total at fiscal year-end to 711 stores.
Regionally, revenue growth was driven by the international region, whose revenue surged 54%, powered by Mainland China's 78% increase. The company's core -- and much more mature -- Americas region's revenue grew 9%. (Americas was formerly called the North America region.)