It is a story of two athletic attire makers. Nike (NKE) reported third-quarter outcomes that have been higher than Wall Road had been anticipating. Lululemon Athletica’s (LULU) fourth-quarter income was according to estimates, however its outlook for the primary quarter was disappointing.On Nike, Morningstar Fairness Analyst David Swartz says the corporate is dealing with “financial challenges in all of its main areas” together with China. Swartz notes that China’s excessive youth unemployment could also be taking a toll on Nike’s outcomes.For Lululemon, Swartz factors out that the corporate tends to “have a historical past of promising low and delivering excessive, so I am at all times a bit skeptical about their steering.” Noting the inventory’s sharp decline in after-hours buying and selling, Swartz says he is without doubt one of the few analysts arguing that it’s has been overvalued. “That is sort of what occurs when you may have an overvalued inventory. If there’s even a gentle disappointment, the inventory can fall fairly quick,” Swartz says.For extra professional perception and the newest market motion, click on right here to observe this full episode of Yahoo Finance Stay.Editor’s word: This text was written by Stephanie Mikulich.Video Transcript- Lululemon and Nike out with their newest quarterly outcomes. Let’s dig into the retailer’s efficiency with Morningstar Fairness Analyst David Swartz. David, it is at all times good to see you. Why do not we begin with Nike right here, Dave? It is up about 2% within the after hours. Give us your tackle that report.DAVID SWARTZ: It seems just like the EPS was somewhat bit greater than anticipated. I used to be at $0.63 for the quarter. So it seems like on an adjusted foundation it was nearer to $1, slightly below $1. In order that’s not unusual for Nike. Nike has been constantly beating EPS estimates.On the highest line, gross sales are very near what I had. I used to be just under 12.4 billion. And Nike reported simply barely above 12.4 billion. So the gross sales have been in line. Clearly, this was not a particularly robust quarter. Having flat gross sales for Nike will not be a fantastic end result. However that was anticipated as a result of the corporate had advised us within the final earnings name again in December that the sportswear market was weak. And a number of other different firms have since corroborated that.Story continues- And the sportswear market is perhaps weak. However Nike had type of– for some time there had type of been its personal machine, proper? And so what does it have to do to type of get again to that place?DAVID SWARTZ: Yeah, there’s been lots of discuss in current months about how Nike has actually misplaced its means in some methods. The corporate maybe has fallen behind some others by way of innovation and new merchandise. So there was some concern about that.Clearly, there are financial challenges in all of its main areas, together with China, for instance. I am certain, as you are conscious, youth unemployment in China is kind of excessive. And that is Nike’s core demographic. And the China market is extraordinarily essential for Nike, each for gross sales progress in addition to earnings progress as a result of it is extremely worthwhile market.Within the US, Nike nonetheless does have publicity to wholesale accounts, regardless of its progress in DTC through the years. And wholesale proper now has been weak. We have seen adverse gross sales studies from malls in the previous couple of weeks. And that does have an effect on Nike. After which in Europe, it has been sort of combined too.So Nike continues to be one of the best performer within the trade. However it’s impacted by trade traits similar to everyone else.- And, David, let’s additionally swap gears discuss Lululemon, which goes in the other way. It is down about 9% right here within the after hours. What’s your tackle their outcomes?DAVID SWARTZ: Yeah, as you talked about earlier, it seems prefer it’s most likely the outlook that was a little bit of a priority. I used to be at 14% gross sales progress for 2024. And the press launch says 10% to 11%. Now it’s important to keep in mind, although, that Lululemon does have a historical past of promising low and delivering excessive.So, you realize, I am at all times a bit skeptical about their steering. However that could be a little bit of a disappointment. As a result of though 10% to 11% can be extraordinarily robust for anyone else within the activewear trade, Lululemon has at all times outperformed so many others for such a protracted interval that expectations are simply actually excessive.And as for the inventory motion, the inventory is kind of costly and has been actually for a very long time. I have been one of many few analysts that has thought that it has been fairly overvalued. And that is sort of what occurs when you may have an overvalued inventory. If there’s even a gentle disappointment, the inventory can fall fairly quick.- Yeah, and certainly, the inventory has already been falling somewhat bit yr to this point. It is down about 6% right here. So what are you going to be trying to type of discover out on the decision to get a greater sense of whether or not that is Lululemon simply type of, as you say, sometimes guiding low, or if it really is seeing progress slowing?DAVID SWARTZ: Yeah, I am certain there will be questions in regards to the scenario in China, which is the place Lululemon is opening lots of shops. And the financial system there’s not so robust in the mean time. After which additionally in North America, which continues to be its greatest market, you realize, what is the outlook for brand new shops, some new merchandise just like the enlargement into males’s, for instance, and footwear?Nike– Lululemon has been rolling out footwear. And they will roll out footwear for males, I feel, quickly. So they will be much more in competitors with Nike and different sportswear firms. And proper now, footwear will not be a sufficiently big marketplace for Lululemon to essentially matter. However it’s attention-grabbing to see how they are saying it should look sooner or later.- David, at all times good to see you. Thanks for becoming a member of us as we speak.DAVID SWARTZ: Thanks.