We think the chances of recovery are decent. It has a solid brand and niche, but has experienced execution issues. Based on its solid history, we believe it can solve these issues. Its valuation is near historical lows, and any positive news could see an amplified stock impact. Here are prior comments on the second quarter: EPS of $3.15 beat estimates of $2.96. Revenue of $2.37B missed estimates of $2.41B. Sales guidance was dropped but earnings guidance largely maintained. Fast-tracking innovation and better near-term execution on women's are key to Lululemon regaining momentum and reaccelerating sales. The company's weaker 2Q results were largely due to less newness in women's colors, prints, silhouettes and patterns, reducing conversion, even as traffic rose in stores and online. Below-consensus 3Q sales guidance for a 6-7% gain and a lowered 2024 view reflect 2Q's weakness persisting. Any upside to guidance hinges on customers' response in 2H. Management expects to return to historical levels of newness in the spring. Strength in men’s and international, along with an improving US business next year, are key to reaching 2026's $12.5 billion revenue goal. Gross margin may still be supported by unchanged markdowns for the year, in line with 2Q.
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