Athleisure and athletic apparel retailers Nike and Lululemon lost ground Friday after their quarterly reports late Thursday, on the heels of a sluggish U.S. retail sales report from March 14. Dow Jones giant Nike reversed lower in late trade. Lululemon tumbled on results. Elsewhere, lifestyle and apparel company Guess spiked after its Q4 results late Wednesday. And Revolve reversed lower after an early upgrade.
Nike, Lululemon Traffic
Placer.ai data indicates that year-over-year foot traffic at Nike and Lululemon stores outpaced the broader athleisure and sportswear brand categories throughout 2023 with Nike the clear leader. Lululemon's quarterly visit growth slowed to 20% for the most recent quarter vs. a 39.4% increase in Q1 2023.
Nike's year-over-year foot traffic remained positive during the first two months of the year, increasing by 35.7% in January and 34.8% in February. Lululemon same store sales declines have slowed to a 1.1% year-over-year decrease in February from 5.6% in January. Overall athleisure and sportswear brand same-store sales fell 10.7% year-over-year in January but improved to a 3% decline in February.
Nike Earnings
Nike reported fiscal Q3 earnings declined about 3% to 77 cents per share while revenue ticked up slightly to $12.43 billion.
FactSet analysts expected earnings to slide 3.8% to 76 cents per share after two quarters of accelerating gains. Revenue was seen declining 1% to $12.28 billion after four quarters of slowing growth.
Excluding restructuring charges Nike guided a 1% increase in fiscal 2024 revenue, which was in line with FactSet estimates of a 0.94% gain to $51.7 billion. However, the company expects revenue in the first half of fiscal 2025 to decline in the low single digits, noting a "subdued macro outlook around the world."
Executives for Nike on the earnings call said they plan to lean into wholesale and retail channels and pivot its focus from its Nike direct and ecommerce channels. The company intends to invest more in marketing, seasonal promotional campaigns and how its products are displayed in stores. Nike direct will still be important to the company, Chief Executive John Donahoe said.
The third-quarter 2024 results come amid a downtrend stretching back to December. The Dow Jones sports apparel giant tumbled on Dec. 22 after its better-than-expected Q2 earnings report provided a soft sales outlook and announced a cost-savings plan to streamline the business.
Nike on Feb. 16 announced plans to reduce its workforce by 2%, or more than 1,600 people, the Wall Street Journal reported, part of an effort to cut $2 billion in costs over the next three years.
Analyst Outlooks
A number of firms cut their targets early Friday on results.
Stifel lowered its price target on NKE to $117 from $129, noting Nike's revenue projections for the first half of the year and the reset of its go-to-market strategies. Still, Stifel said Nike's market leading position and margin opportunities are "worth a premium" and offer a "credible case" for sustainable double-digit EPS growth. The firm kept a buy rating on the shares.
Wells Fargo, Baird, Piper Sandler and UBS also lowered their price targets.
Citi is a bit more bullish, calling the post-earnings selloff a buying opportunity. The firm upgraded Nike to neutral from sell and lifted its price target to $24 from $19.
Prior to earnings, Oppenheimer on Feb. 16 downgraded NKE to perform from outperform and lowered its price target to $110 from $150. The research note said there was "no quick fix" for the retailer.
Edward Jones on Feb. 15 added Nike to its Stock Focus List, noting the company still has a "solid" long-term growth outlook. Edward Jones expects the near-term outlook to remain choppy but Nike should benefit globally from growing sports participation and a business model shift to more online sales. The firm predicts online sales will grow to 35% of Nike's total sales over the next few years from around 20% currently. Edward Jones has a buy rating on the stock.
Nike Stock
NKE stock surrendered gains and dived 6.9% Friday, leading the declines for Dow Jones stocks. Shares tumbled nearly 24% from their late December highs following its Q2 report.
Nike was added to SwingTrader on Feb. 15 with a full short position as it faces resistance at its 50-day moving average and trades below its 21-day line.
NKE has dropped 13.6% in 2024. Among the other stocks in Nike's industry group, Deckers Outdoor traded narrowly higher, ON Holding dopped almost 2%, after the report. Dick's Sporting Goods shaved off 0.3%.
DECK stock is trading in a three-weeks tight pattern, MarketSurge charts show.
ONON shares are trading just below a 35.58 buy point for a 32-week cup-with-handle base.
Lululemon
Lululemon's fourth-quarter earnings of $5.29 per share, up from GAAP earnings of 94 cents per share the year prior and adjusted earnings of $4.40 per share for the period. Lululemon did not provide adjusted earnings numbers for its current report. Revenue jumped almost 16% to $3.21 billion.
FactSet expected earnings to increase 13.6% to $5 per share on 15.2% revenue growth to $3.19 billion. The retailer averaged 33.5% earnings growth over the last four quarters with an average revenue increase of 22.8%.
The company guided Q1 earnings between $2.35 and $2.40 per share, which came in below the FactSet forecast of $2.54 per share. Its revenue forecast of $2.18 billion to $2.2 billion just missed estimates of $2.25 billion.
Lululemon expects full-year earnings between $14 and $14.20 per share on $10.7 billion to $10.8 billion in sales. FactSet predicts earnings of $14.26 per share on $10.94 billion in revenue.
Truist on Tuesday kept a buy rating on LULU stock with a $561 price target. It noted that Lululemon continues to benefit from customer loyalty, international momentum and leading brand heat. Lululemon's U.S. trends appear to have decelerated during its start to the first quarter against tough year-over-year comparisons, but these have largely been priced into the stock, the Truist note said.
Lululemon beat Q3 estimates in early December but its outlook came up short of forecasts. The company lifted its full-year revenue outlook to range from $9.55 billion to $9.58 billion, compared to prior range of $9.51 billion to $9.57 billion. Adjusted earnings are seen increasing up to 23% to range from $12.34 to $12.42 per share. FactSet expects 2023 earnings of $12.18 per share on $9.596 billion in revenue.
Lululemon Stock
LULU stock tumbled 15.8% Friday on results to lead losses for the S&P 500. Shares rose 2% during Thursday trade.
The stock is down 21% so far this year.
Apparel retailers that could show some reaction to Lululemon's report include Abercrombie & Fitch and Urban Outfitters.
LULU stock leads the Retail-Apparel/Shoes/Accessories Group according to the IBD Stock Checkup.
Shares have a near-perfect 98 Composite Rating out of a best-possible 99, as well as a 98 EPS Rating. The Composite Rating combines various technical indicators into one easy-to-read score. Its relative strength line has fallen from its mid-December highs and Lululemon has an 80 RS Rating.
Guess?, Revolve Jump
Guess reported a 15.5% adjusted earnings increase to $2.01 per share on 9% revenue growth to $891 million for Q4, beating FactSet estimates of $1.56 per share on $855.5 million in sales. The Los Angeles-based retailer said it expects fiscal 2025 consolidated revenue growth to range from an 11.5% to 13.5% increase and top $3 billion for the first time ever.
Guess guided a Q1 adjusted loss of 41 cents to 37 cents per share, missing FactSet estimates of a 19 cent loss. But the full-year adjusted earnings range of $2.56 to $3 per share was in line with targets of $2.99 per share. FactSet expects 2025 revenues increase 5.8% to $2.94 billion.
GES stock on Friday slid 2.3%. Shares on Thursday leapt nearly 21% Thursday, extending further from a flat base buy zone following its Feb. 16 breakout. Shares jumped 32.7% so far this year.
Elsewhere, TD Cowen upgraded Revolve stock to outperform from market perform in an early Thursday research note. The firm sees an opportunity to buy RVLV stock after a year of markdowns and broad-based softness, calling Revolve a "leading Gen-Z fashion platform." Revolve has several positive drivers, including a return to growth, sales growth above inventory growth and stabilizing returns. TD Cowen noted easy comparisons will support margin expansion and growth, while its owned brands, new product category and international growth "provide upside optionality." TD Cowen lifted its price target on Revolve to $25 from $23.
RVLV ticked up Friday after reversing on Thursday to post a slight decline. Shares are extended about 18% from a Feb. 27 breakout from a cup-with-handle base.
Revolve rallied 24.2% in 2024.
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