Aside from a few obscure Consumer Staples names, we've reached the end of the Q1 earnings season.
There were some fantastic double beats and rallies. Berkshire Hathaway $BRK.A / $BRK.B was one of those, and it closed last week at a new all-time high.
However, we saw a lot more stocks get slammed for beating expectations.
The world's largest retailer, Walmart $WMT, snapped a 3-quarter beat streak after it reported a double beat. The stock has continued to print fresh lows.
Crowdstrike $CRWD is another name that got slammed for reporting a double beat.
Last week, we told you that we were looking forward to the Lululemon $LULU earnings report. This is because the stock had one of its best earnings reactions ever in Q4 2024. We expected to see follow-through on the upside this quarter.
It turned out to be a complete disaster of a reaction instead. Let's talk about what happened.
Here are LULU's earnings stats π
*Click the image to enlarge it
Lululemon beat its top and bottom-line expectations, but the market didn't like it.
They reported revenues of $3.61B, versus the $3.58 estimate, and earnings per share of $6.14, versus the $5.85 estimate.
The stock fell over 14% with a reaction score of -4.09, closing at its lowest level since last October.
Let's dive into the data and talk about what went wrong with this report π
7 of LULU's last 9 earnings reactions have been positive:
Despite this quarter's reaction being very negative, Lululemon has been consistently reacting positively to its earnings reports recently.
The company expects its gross margin to compress this year, primarily because of tariffs related to China and Mexico.
Additionally, they issued guidance for the year that was lighter than expected. They're planning significant investments in marketing and brand building, which, although strategic, could put pressure on short-term profitability.
Heading into the report, the stock was bear flagging into the VWAP anchored to the all-time high from late 2023. This developed into significant resistance.
Until LULU can reclaim this VWAP, the path of least resistance is likely to be sideways to lower for the foreseeable future.
