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Lululemon Athletica shares surge on positive q4

The news shaping the markets today

Russia pledged to reduce its military activity around Kyiv and Chernihiv, following talks with Ukraine in Istanbul. This exerted pressure on gold on Tuesday. Prospects of an end to the ongoing war boosted risk sentiment in the global financial markets.


Japan’s retail sales contracted by 0.8% from a year ago in February, following 1.1% growth in the previous month. Although this was the first decline in retail trade since September 2021, the JPY/USD pair climbed in forex trading this morning.


New Zealand’s ANZ Business Outlook Index rose to -41.9 in March, from a 22-month low of -51.8 in February. The news lent support to the NZD/USD forex pair.


Iran’s annual inflation rate eased to 34.7% in March, from 35.4% a month ago, reaching the lowest level since September 2020. The IRR/USD pair remained flat in forex trading this morning.


Chile’s central bank hiked its monetary policy interest rate by 150 bps to 7% at its latest meeting. Despite this, the CLP/USD forex pair remained under pressure due to ongoing macroeconomic concerns.

 

What’s happening: Shares of Lululemon Athletica jumped in after-hours trading on Tuesday, after the company reported upbeat earnings for its fourth quarter.

What happened: Demand for athletic wear remained elevated, despite the easing of covid-19 restrictions.

Lululemon surpassed annual revenues of $6 billion for the first time and issued a strong forecast for the year.

How were the results: The Vancouver, Canada-based company reported growth in both sales and earnings for the three months ending January 30.

  • Revenues grew 23.1% year-over-year to $2.13 billion, from $1.7 billion in the year-ago quarter. Net revenues for full fiscal year jumped 42% to $6.3 billion.
  • Net income climbed 31.7% to $434.5 million, or $3.36 per share, in the fourth quarter, from $329.8 million, or $2.52 per share, in the year-ago period.
  • Adjusted earnings came in at $3.37 per share, beating Street estimates of $3.28 per share.

Why it matters: Lululemon had boosted its guidance when it released earnings for the third quarter in December. However, the stock remained under pressure as the guidance failed to impress investors and the earnings warning issued in January raised concerns.

The release of the fourth-quarter results came in just days after the company announced the launch of its first-ever footwear range. Lululemon’s total comparable sales grew 22%, while comparable store sales grew 32% and direct to consumer net revenues expanded by 17%.

The company ended the year with cash and cash equivalents worth $1.3 billion. Gross margins contracted by 50 bps to 58.1%, while operating margins expanded 120 bps to 27.7% during the quarter.

Management guided to net revenues between $1.525 billion and $1.550 billion for the first quarter, in-line with market expectations of $1.55 billion. The company projected earnings in the range of $1.38 to $1.43 per share, meaningfully higher than the consensus estimate of $1.29 per share.

The company also guided to net revenues between $7.490 billion and $7.615 billion and earnings of $9.15 to $9.35 per share for fiscal 2022. The projections were significantly higher than Street expectations of $6.3 billion in sales and earnings of $7.69 per share.

The company repurchased 2.2 million shares for $812.6 million during fiscal 2021. Lululemon announced a further buyback authorisation of up to $1 billion of common shares.

How shares responded: Lululemon’s shares jumped 7.9% to $371.00 in after-hours trading, following the release of quarterly results. The stock had climbed 3.7% during the regular trading hours on Tuesday but it still down 11% year-to-date.

What to watch: Investors will keep an eye on trends supporting the company’s athletic wear and the performance of its recently added footwear category. Markets will also monitor the ongoing Russia-Ukraine war and supply chain issues.

The markets today

Gold will be in focus today after recording losses on Tuesday

 

Context: Gold tumbled to a one-month low on Tuesday, as investors chose riskier assets on prospects of the peace talks between Russia and Ukraine leading to some resolution.

Details: Since Russia’s attack on Ukraine, gold prices have maintained an upward trajectory due to the yellow metal’s safe haven status among investors.

Russia pledging to reduce its military activity around Kyiv and Chernihiv, following talks with Ukraine in Istanbul exerted pressure on gold on Tuesday. Prospects of an end to the ongoing war supported risk sentiment in the global financial markets.

However, benchmark 10-year bond yields remained close to multi-year highs on expectations of aggressive rate hikes by the Federal Reserve this year, given the sharp acceleration in inflation in the US.

Gold for April delivery fell $27.60 to close at $1,912.20 an ounce, while silver for May delivery declined 46 cents to $24.74 an ounce. May copper remained unchanged at $4.73 a pound on Tuesday.

What to watch: The ongoing conflict between Russia and Ukraine will remain a major concern for traders. Investors will also keep an eye on rising covid-19 cases in China, Europe and other regions, with total global cases surging past 485 million.

Other Markets: European trading indices closed higher on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 0.86%, 2.79%, 3.08% and 1.74%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.1100 and 1.1108 Negative
GBP/USD – 1.3091 and 1.3102 Positive
USD/CAD – 1.2492 and 1.2498 Positive
Gold – 1920.04 and 1923.04 Negative
Silver – 24.908 and 24.951 Positive

 

Market snapshot

What else to watch today

Spain’s consumer price index and industrial confidence indicator, Turkey’s economic confidence index, Italy’s industrial sales, and producer prices, Eurozone’s economic sentiment indicator, gauge for selling price expectations, services confidence indicator, industrial confidence indicator, consumer confidence indicator, and consumer price expectations for the next twelve months, US MBA mortgage applications, ADP employment change, corporate profits, GDP growth rate, crude oil inventories, gasoline inventories, heating oil stocks and distillate stockpiles, Brazil’s producer prices and value of loans, Germany’s inflation rate, Mexico’s unemployment rate, as well as Russia’s unemployment rate, real wages, retail sales, manufacturing confidence, corporate profits, GDP growth rate.

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