Despite exceeding their quarterly top and bottom line expectations on Thursday, Nike NKE and Lululemon LULU shares fell in today’s trading session due to softer-than-expected guidance.
Still, investors may be wondering if it’s time to buy the dip in these prominent retailers with Nike’s stock now down -13% year to date while Lululemon shares have fallen -20%.
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Favorable Quarterly Results
Reporting its fiscal third quarter results yesterday, Nike posted earnings of $0.98 per share which climbed 24% year over year and crushed Q3 expectations of $0.69 a share by 42%. Quarterly sales of $12.42 billion were slightly up from $12.39 billion a year ago and beat estimates by 1%. Notably, Nike has exceeded earnings expectations in three of its last four quarterly reports posting an average earnings surprise of 22.55%.
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Turning to Lululemon, it reported Q4 earnings of $5.29 per share which beat estimates by 5% and soared 20% from $4.40 a share in the comparative quarter. Fourth quarter sales leaped 15% to $3.2 billion and came in slightly above estimates of $3.18 billion. More impressive, Lululemon has now surpassed earnings expectations for 15 consecutive quarters posting an average earnings surprise of 9.68% in its last four quarterly reports.
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Weaker Sales Guidance
The fret of Nike and Lululemon losing their mojo comes as both apparel titans gave softer revenue guidance. Nike still expects its total sales to be up 1% in fiscal 2024 which is roughly on par with Zacks estimates. However, the iconic gym shoe designer warned of a single-digit decline in revenue during the first half of FY25 as it works on innovating its product portfolio in what it called a subdued economic environment.
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Meanwhile, Lululemon attributed softer-than-expected sales guidance for its upcoming fiscal first quarter to slower consumer demand. The yoga-inspired apparel company expects Q1 sales of $2.17 billion to $2.2 billion with Zacks estimates at $2.27 billion (Current Qtr). Additionally, Lululemon forecasts total sales for its current FY25 to be in the range of $10.7-$10.8 billion which would be an 11-12% increase with Zacks estimates at $10.92 billion or 13% growth.
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Earnings Outlook
Nike left its full-year net income expectations for FY24 unchanged with its EPS projected to rise 9% to $3.54 per share based on Zacks estimates. Fiscal 2025 earnings are currently forecasted to jump another 16% to $4.12 per share.
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Pivoting to Lululemon, it offered EPS guidance for Q1 in the range of $2.35-$2.40 with Zacks estimates calling for earnings of $2.55 per share or 12% growth. Lululemon expects its full-year EPS for FY25 to be between $14.00-$14.20 which was below the current Zacks Consensus of $14.36 per share and over 12% growth. Furthermore, FY26 EPS is expected to expand another 15% to $16.61 per share based on Zacks estimates.
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Bottom Line
While Nike and Lululemon do appear to be struggling with their growth expectations both stocks currently land a Zacks Rank #3 (Hold). With that being said, longer-term investors could be rewarded for holding stock in these consumer-centric giants at their current levels although short-term economic headwinds could alter their growth trajectories.
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