2023-08-31 17:16:59 ET

Shares of Lululemon Athletica Inc (NASDAQ: LULU) are slightly up in extended trading after the retailer reported market-beating results for its fiscal second quarter.

Notable figures in Lululemon’s Q2 earnings release

• Earned $341.6 million versus the year-ago $289.5 million
• Per-share earnings also went up from $2.26 to $2.68
• Revenue jumped 18% year-over-year to $2.21 billion
• Consensus was $2.54 a share on $2.17 billion in revenue
• Comparable sales were up a less-than-expected 11%
• At $1.70 billion, inventories were still up 14% year-on-year

Gross margin stood at 58.8% – slightly above 58.5% that experts had forecast. Still, Jefferies analyst Randy Konik told CNBC today:

Lululemon plays in a very competitive industry. So, we think Lulu will start to run into a wall in the next couple quarters as growth starts to slow and expectations are getting too high.

Lululemon stock is up on upbeat guidance

The stock is up also because the athletic apparel company raised its guidance for the full year.

Lululemon now forecasts its revenue to fall between $9.51 billion and $9.57 billion in fiscal 2023 on up to $12.17 of per-share earnings. But on CNBC’s “

Power Lunch

”, retail analyst Konik added:

They’re starting to reach into other products to try to extend growth [e.g.] footwear – it hasn’t done well and might show that the company strategy is going in the wrong direction.

Its current quarter outlook came roughly in line with the Street estimates on Thursday. At writing, Lululemon shares are up over 30% versus their year-to-date low.

Is it worth buying Lululemon stock?

Other notable figures in the

earnings release

include a 15% annualised growth in DTC revenue that made up 40% of the total sales in the second quarter. According to Jefferies’ Randy Konik:

Our concern going forward is that a lot of the easy growth has been had here and the growth ahead will be tougher to come by.

His underperform rating on Lululemon stock comes with a price target of $250 that warns of a more than 35% downside from here.

Note that Lululemon is committed to doubling its sales from $6.25 billion in 2021 to $12.5 billion by 2026 – a strategy it calls “Power of Three x2”.

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Lululemon Q2 earnings: ‘company strategy is going in the wrong direction’

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