Favorable Quarterly Results
Exceeding quarterly expectations typically creates a buoyant aura in the stock market–unless softer guidance muddies the waters, as it did today for Nike and Lululemon. Nike’s tremendous performance was evident in a 24% surge in earnings year over year, clocking in at $0.98 per share for Q3. Quarter-on-quarter sales upticked slightly but affirmatively, hitting $12.42 billion, a hair above last year’s figures. Nike’s propensity for surprise earnings echoes the company’s previous script–this time outstripping estimates by 42%.
Image Source: Zacks Investment Research
Lululemon, on the other hand, narrated a tale of financial prowess with its Q4 earnings soaring to $5.29 per share, an impressive 20% jump from the antecedent quarter. Despite the challenging landscape, sales rose by 15% to $3.2 billion, marginally surpassing expectations. The company’s remarkable consistency in surpassing earnings projections over the past 15 quarters underscores a rock-solid trajectory.
Image Source: Zacks Investment Research
Weaker Sales Guidance
However, the celebration is short-lived as seen through a dimmer lens of future expectations. Nike forewarns of a potential single-digit revenue slump in FY25’s first half, attributing it to a brewing innovation storm, whereas Lululemon points to subdued consumer demand for tapering sales projections in its forthcoming fiscal quarter. Indeed, the path forward looks challenging for these stalwarts in the realm of sportswear and athleisure.
Image Source: Zacks Investment Research
Earnings Outlook
Peering into the crystal ball of Nike’s earnings, projections paint a picture of a 9% uptick in EPS to $3.54 for FY24, with a promising 16% surge envisioned for FY25. Its counterpart, Lululemon, projects a slower but steady rise in the EPS trajectory, with Q1 expected to hover between $2.35-$2.40. The company’s full-year projections are pegged at $14.00-$14.20 for FY25, showcasing the brand’s ability to weather temporary storm clouds while steering a growth-oriented course.
Image Source: Zacks Investment Research
Bottom Line
The stock market is a temperamental beast, swayed by storms and sunshine alike. While Nike and Lululemon face a temporary fog, they have ingrained themselves as stalwarts in the world of athletic wear. Despite the short-term economic headwinds, the allure of holding stakes in these seasoned players remains strong. As both stocks flaunt a Zacks Rank #3 (Hold), the prudent investor would do well to reflect on the long-term promises these consumer-centric giants hold, even amid turbulent times.
