Lululemon, Chewy Are Making Big Moves Late Tuesday

Tuesday was another good day for the stock market, as investors saw many stocks continue to claw their way back from substantial losses earlier in the year. The Dow Jones Industrial Average (^DJI -1.72%), Nasdaq Composite (^IXIC -1.54%), and S&P 500 (^GSPC -1.33%) are still well below their highest levels ever, but gains of 1% to 2% helped put another dent in the declines they've seen in the first quarter of 2022.

Data source: Yahoo! Finance.

After hours, a couple of key stocks reported their latest earnings results. Lululemon Athletica (LULU -1.62%) had set the bar low, warning that its holiday season might be weaker than it had seen in previous years. Meanwhile, investors had high hopes for pet food e-commerce retailer Chewy (CHWY -1.62%). Below, we'll look at both earnings reports and see how their respective stocks did.

Lululemon gets a bounce

Shares of Lululemon Athletica were up nearly 8% in after-hours trading late Tuesday. The yoga-centered athletic apparel retailer's financial numbers were reasonably good, and investors liked the shareholder-friendly move the company added to its quarterly report.

Image source: Getty Images.

Lululemon saw revenue in the fourth quarter rise 23% year over year. Comparable store sales rose 32%, while direct-to-consumer sales stayed strong with a 17% rise. North American results were slightly weaker with a 21% rise, but Lululemon made up for that performance with much bigger gains of 35% internationally. Adjusted earnings came in at $3.37 per share, up 31% from year-ago levels.

Lululemon's numbers were even better compared to pre-pandemic levels. Quarterly net revenue jumped 52% from two years ago, and full-year revenue of $2.3 billion was 57% higher than 2019's total, with full-year adjusted earnings of $7.79 per share also climbing by more than half over the two-year period.

Shareholders were also pleased to see Lululemon approve a new $1 billion stock repurchase program. With the company having spent more than $800 million on buybacks in the fourth quarter, Lululemon sees the recent downturn as a good opportunity to reduce its share count, and investors seem hopeful that the company will be able to beat calls for 2022 revenue to rise 20% to 22% and produce earnings of $9.15 to $9.35 per share.

Chewy rolls over

Shareholders of Chewy were less fortunate, as the stock fell almost 14% in after-hours trading. The e-commerce pet food retailer's  fourth-quarter financial results didn't get the reception those watching the stock had hoped for.

Chewy's results were mixed. Sales climbed 17% in the fourth quarter from the previous year's period, completing a 2021 fiscal year with 24% gains from 2020. Active customers rose nearly 8% year over year to 20.7 million. However, gross margin declined, and that produced net losses of $63.6 million for the quarter and $73.8 million for the year.

The company blamed inflationary pressures for the disappointing losses. Chewy wasn't able to boost prices quickly enough to catch up with cost inflation, and it also faced increases in the freight costs it incurred to bring products to the company for resale to customers. Chewy's new outbound shipping contract with FedEx (FDX -1.08%) had only a modest effect on gross margin, but it projects that the new deal will cause more pressure on gross margin levels throughout 2022.

In the long run, Chewy is excited about its new initiatives, including the future implementation of a loyalty program, sponsored ads on its website, and the ongoing rollout of its Chewy Health veterinary care division. For now, though, investors are more worried about slowing growth, and that weighed on the stock price.