Despite soaring past quarterly expectations, Nike’s (NKE) and Lululemon’s (LULU) shares stumbled during today’s trading session due to tepid guidance.
The allure of buying the current dip in these retail giants intensifies with Nike’s stock plummeting -13% year to date and Lululemon’s shares sliding -20%.
Favorable Quarterly Results
In its fiscal Q3 report, Nike reported earnings of $0.98 per share, exceeding estimates by a staggering 42%. Quarterly sales of $12.42 billion, a slight increase from the previous year, beating estimates by 1%. Nike has surpassed earnings expectations in three of the last four quarters, with an average surprise of 22.55%.
Lululemon posted Q4 earnings of $5.29 per share, outperforming estimates by 5% and witnessing a 20% surge year-over-year. Fourth-quarter sales rose 15% to $3.2 billion, slightly above projected figures of $3.18 billion. Impressively, Lululemon has exceeded earnings expectations for 15 consecutive quarters, with an average surprise of 9.68% in the last four reports.
Weaker Sales Guidance
Concerns loom over Nike and Lululemon as they offer subdued revenue guidance. Nike anticipates a 1% increase in total sales for fiscal 2024, with a warning of a single-digit revenue decline in the first half of FY25 due to evolving their product line in a subdued economic climate.
Lululemon attributed weaker sales guidance for its upcoming Q1 to slowing consumer demand. With expected Q1 sales of $2.17 billion to $2.2 billion, slightly below estimates, and a forecast of $10.7-$10.8 billion total sales for FY25, an 11-12% increase, also falling slightly short of projections.
Earnings Outlook
Nike maintains its full-year net income projection for FY24, with EPS expected to climb 9% to $3.54 per share. Fiscal 2025 earnings are predicted to surge by 16% to $4.12 per share.
Lululemon forecasts a Q1 EPS range of $2.35-$2.40, with full-year FY25 EPS anticipated to fall between $14.00-$14.20. Further, FY26 EPS is expected to grow by 15% to $16.61 per share.
Bottom Line
Although Nike and Lululemon face challenges in meeting growth expectations, both stocks hold a Zacks Rank #3 (Hold). Long-term investors may find value in these consumer giants at current levels, despite potential short-term economic impacts.
