Lululemon earnings top estimates, but shares fall after retailer cuts forecast for Mirror sales

Lululemon‘s stock gave up gains in extended trading Thursday after the company slashed its sales expectations for Mirror, the at-home fitness device it acquired last year.

The athletic apparel maker reported fiscal third-quarter earnings and sales ahead of analysts’ estimates, prompting it to raise its full-year outlook.

However, it said some shopper demand over the holidays might have been pulled forward, as consumers kicked off their gift buying earlier this year. As a result, its fourth-quarter outlook came in lighter than some analysts had expected.

Lululemon shares were recently falling less than 1% in after hours, having closed the day down 2.1%.

Here’s how Lululemon did in the three-month period ended Oct. 31 compared with what analysts were expecting, based on a Refinitiv survey:

• Earnings per share: $1.62 adjusted vs. $1.41 expected
• Revenue: $1.45 billion vs. $1.41 billion expected

Lululemon’s third-quarter net income rose to $187.8 million, or $1.44 per share, from $143.6 million, or $1.10 per share, a year ago.

Excluding one-time items, it earned $1.62 per share, ahead of expectations for $1.41.

Sales rose about 30% to $1.45 billion from $1.12 billion a year earlier. That was ahead of expectations for $1.41 billion.

The boost was largely driven by Lululemon’s men’s business, which grew 44% year over year. Sales in womenswear were up 25%.

Same-store sales, which measure sales at stores open for at least 12 months, rose 32%. In North America, sales were up 28% year over year, while revenue climbed 40% internationally.

The company is pleased with its early holiday season performance, said Chief Executive Calvin McDonald in an earnings release. Shoppers have been spending money on workout apparel such as leggings and sweat pants for themselves, but also as a gift for others.

McDonald said the retailer’s online sales on Thanksgiving Day this year were its highest in a single day on record.

Last year, as consumers shifted from working out at the gym to working out at home, Lululemon made a $500 million bet on Mirror. But that bet is now making some investors weary.

On Thursday, Lululemon lowered its outlook for Mirror sales for the year to be between $125 million and $130 million, while previously it was looking for more than $150 million.

“As you know, 2021 has been a challenging year for digital fitness,” McDonald said during a call with analysts. “We will not chase growth at any cost. We simply don’t need to.”

Still, Chief Financial Officer Meghan Frank commented that the company feels “well positioned for a strong end to 2021.”

For the fourth quarter, Lululemon expects revenue to range from $2.13 billion to $2.17 billion, and adjusted earnings per share between $3.25 and $3.32. Analysts had been looking for sales of $2.17 billion and earnings of $3.30 per share.

It raised its full-year revenue outlook to a range of between $6.25 billion and $6.29 billion. Previously, it expected revenue of $6.19 billion to $6.26 billion. Analysts had been forecasting sales of $6.27 billion.

It sees annual diluted earnings per share in a range of $7.38 to $7.45. After adjustments, it expects to earn between $7.69 and $7.76 per share. Analysts had been looking for full-year adjusted earnings per share of $7.51.

As of Thursday’s market close, Lululemon shares are up about 20% year to date.

Find the full earnings press release from Lululemon here.