Lululemon (LULU:NASDAQ) beats expectations, Costco (COST:NASDAQ) misses

Shares of the Lululemon (LULU:NASDAQ) fell more than 7% after hours, after the athletic apparel retailer reported sales and profit that topped estimates, but offered softer guidance than expected for the fourth quarter.

The company reported earnings of $2 per share vs. $1.97 expected for Q3 2022 fiscal period. Revenue for the three-month period came in at $1.86 billion vs. $1.81 billion expected. Lululemon’s third-quarter net income rose to $255.5 million, or $2 per share, from $187.8 million, or $1.44 per share a year ago. Revenue rose 28% to $1.86 billion.

Its total comparable sales increased by 22%. The closely watched metric, also called same-store sales, includes sales from stores that have been open continuously for at least 12 months, without temporary closures or renovations.

The athletic apparel retailer is a popular mall destination that’s known for its trendy — and pricey — workout apparel and loungewear. Even as inflation hits Americans’ wallets and people dress up again, investors have bet that the brand can keep drawing shoppers and getting them to spend.

CEO Calvin McDonald said on an earnings call that the company had a strong start to the holiday season. He said Black Friday was the biggest day in its history for sales and store traffic. But he added, “We also recognize that the external environment remains challenging with several high-volume weeks still in front of us.”

The company’s guidance for the fourth quarter came in weaker than hoped. Lululemon said Thursday it expects fourth quarter per-share earnings of $4.20 to $4.30, compared to estimates of $4.30. It also sees revenue of between $2.605 billion to $2.655 billion, versus a projected $2.649 billion.

For the full year, the company said it sees revenue of $7.944 billion to $7.994 billion, up from its previous forecast of between $7.865 billion and $7.940 billion. It also raised its adjusted earnings per share outlook to a range of $9.87 to $9.97, from last quarter’s guidance of $9.75 to $9.90.

Shares of the company are down more than 4% so far this year. The stock has outperformed the S&P 500 Index, which is down about 17% during the same period. It closed Thursday at $374.51, bringing the market cap to $47.75 billion.

Costco misses….

Shares of retailer Costco (COST:NASDAQ) slumped 1% after the company reported revenue that fell short of Wall Street’s expectations. The company reported $54.44 billion in revenue where analysts surveyed by Refinitiv anticipated $54.64 billion during the quarter.

Comparable sales, those from stores of digital channels operating for at least 12 months, rose 7.1% in the quarter ended Nov. 20. That quarterly figure, which excludes currency fluctuations and gasoline sales, hasn’t fallen below 9% over the past two years. Online sales fell 3.7% from the prior year, Costco said.

The slower growth is both due to the quarterly comparison with massive growth last year and some pullback on spending, said Costco Chief Financial Officer Richard Galanti on a call with analysts Thursday. “It rains on all of us during these tougher times particularly with bigger ticket discretionary items,” said Mr. Galanti. Sales of food and household goods are strong, he said.

In recent months, large retailers including Walmart (WMT:NYSE) and Target (TGT:NYSE) have noted a shift in consumer spending as food and gas prices remain elevated. Shoppers have given priority to spending on food and other necessities, more often forgoing toy, furniture and other discretionary spending, said executives at those companies during earnings conference calls.

Costco, which sells items in bulk to paying members, tends to attract higher income shoppers than many of its big-box competitors, in part, because shoppers need to have enough money to buy large quantities, even if prices are lower per item.

More high-income shoppers are coming to Costco for lower prices on a per item basis, said Mr. Galanti on the call.

Shares of Costco are down 15.4% so far this year.