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Lululemon misses on Q1 earnings estimates

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Lululemon reported earnings per share of $0.22, falling short of the Street's expected $0.29 per share. The athletic retail company also missed revenue estimates, reporting $652 million, below the Street's expected $690.926 million. Myles Udland breaks down Lululemon's first-quarter results on The Final Round.

Video Transcript

SEANA SMITH: I want to get to some breaking news that we have after hours. Lululemon is out with earnings results. Myles has been going through the headlines and has the numbers for us. Myles.

MYLES UDLAND: Yeah, Seana, not a great quarter here from a company that I think investors had pinned quite a lot of hopes on. So the company, coming in, reporting earnings per share of $0.22. The street was looking for $0.29. Also light on the top line revenues. $652 million. The street was looking for something closer to $690 million. The stock is off about 5% in after hours, following these results. Lululemon not providing detailed guidance, of course, in the wake of the coronavirus.

Outlining some shifts in their business. Obviously, direct to consumer sales were up 68% during the quarter, as you would expect. All their stores were closed for the entire month of April. They've begun reopening some stores, 295 are open as of now. And D2C was also 54% of the company's total sales during the quarter. But with a stock that had been up more than 70% from its lows, there were [AUDIO OUT] closer to 6%, more than 6%, excuse me, in the after hours session, following a disappointing quarterly report. Seana.

SEANA SMITH: Yeah, it certainly is. And Myles, I was just going through some of these headlines, I mean, Lululemon did address, they obviously, like you said, pulled their guidance. But they did make some comments about coronavirus, the impact that it's having on its stores. They closed a lot of their centers. They also said that right now they're operating with precautionary measures in place, such as to reduce operating hours, physical distancing, enhance cleaning and sanitation, maximum occupancy levels.

But I think the big question here, and that remains for a lot of these retailers is, even when they do open their stores, even when people do, I guess, start venturing outside of their houses, how comfortable is the consumer going to be to reenter a lot of these locations? Are they going to feel comfortable going into Lululemon stores? Or will they still opt to just stay at home or order those goods online? So I think that's a big question mark here, not only for Lululemon, but also for a lot of its competitors.

MYLES UDLAND: Well, what we're pretty sure people won't be doing in Lululemon stores is yoga class, which is part of the community that they have. But we have talked so often on this program, and we're going to talk about it for the rest of the year, the decisions people make. The areas where they say, I will take this chance.

I still think it's likely, given the enthusiasm consumers have for the brand, that people say, I'm not going to go to a lot of stores, but maybe Lulu is one of the stores that I choose to go to. But the market has already sniff that out. I mean, the stock was trading at an all-time high a couple of sessions ago. So again, the bar was just very high for this company coming into the quarter, and so I think that's why the miss on the top and the bottom line is putting the stock under pressure here in the immediate reactions to this number.

RICK NEWMAN: Here's a question about fashion and fitness. If you're just working out at home and nobody sees you, do you wear Lululemon? I think you don't. I mean, I think you just wear whatever old sweatshirt is hanging around.

SEANA SMITH: And then on the flip side of that, you're more likely to wear Lululemon since you're wearing it day in and day out, and you don't have to go out in public. You don't have to dress up for work. So you have a whole different wardrobe it seems like over the last couple of months.

MYLES UDLAND: That's right. Lululemon has now transitioned, Rick, from being a gym item to a work item. So [INAUDIBLE] there is still that story.

RICK NEWMAN: Also loungewear.

SEANA SMITH: Absolutely.

RICK NEWMAN: They need a new loungewear line.

MYLES UDLAND: And look, I know, I know this stuff is expensive, Rick, but it does last longer, it does last longer than--

[INTERPOSING VOICES]

RICK NEWMAN: You know. It's right up my alley.

SEANA SMITH: There we go. But again, Lululemon shares under pressure this afternoon after reporting those results, off just around 5% in after hours.