After yesterday’s close, there were two notable earnings reports from a pair of retailers: Lululemon (LULU) and Restoration Hardware (RH). Both stocks are seeing impressive positive reactions in response to earnings this morning with LULU up 6.35% ahead of the open and RH exploding higher, now up 26.80% as of this writing. These strong responses are pretty in line with the stocks’ histories over the past few years.
In LULU’s case, the company beat EPS estimates by 4 cents and revenues came in 20.4% higher than last year at $782.3 million versus estimates of $755.92 million. The company also kept inline guidance. Over the past couple of years, the company has been reporting more of these of solid quarters, and the stock price has reflected that. Prior to 2017, the stock had been meandering sideways and reporting unimpressive earnings results (frequently lowered guidance and some EPS or revenue misses). But since its March 2017 report when EPS missed and guidance was lowered (the last time either of these happened)— which led the stock to gap down over 20% right around $50—LULU has been on the up and up with EPS and revenue beats every quarter (now 9 straight). Additionally, there were multiple quarters with raised guidance which prior to 2017 had not happened since 2010. Today will mark the ninth time since that weak quarter in March 2017 that the stock will gap up at the open of trading following earnings. These more positive fundamental trends have led the stock to sit in a solid uptrend over the past couple of years and today’s gap higher will bring it to a new all-time high. While most of retail is stalling out these days, LULU is still firing on all cylinders.
Restoration Hardware (RH) has been rocketing higher in pre-market trading and is currently up 26% versus yesterday’s close. Last night the company reported a triple play with raised guidance, EPS of $1.85 versus estimates of $1.53, and revenues just under $15 million above estimates. That is the first triple play for RH since 2013!
RH’s massive share price move on earnings is nothing new for the stock. On average in the course of its history as a public company, the stock sees a full day swing in either direction of 12.95% on its earnings reaction day. The past several quarters, like this quarter, have seen above-average volatility. Looking over a few from the past year, RH has seen moves of -21.97%, -13.07%, +30.55%, +22.48%, ad 44.76%. Over the past several months, the stock has been in a downtrend. As recently as March, RH was trading above $150, but it had fallen all the way down to the mid-$80s by early June. Over the past two weeks leading up to last night’s earnings report, the stock managed to break above its downtrend line, and today’s positive response to earnings is likely to erase a sizeable portion of the losses from the past few months. Start a two-week free trial to Bespoke Institutional to access our interactive Earnings Explorer and much more.