A customer enters a Lululemon store on June 02, 2023 in Corte Madera, California.
Justin Sullivan | Getty Images
Lululemon raised its full-year guidance on Thursday after reporting an 18% jump in sales and profit for its fiscal second quarter, boosted by a 61% revenue increase in China.
The athletic apparel retailer now expects sales to be between $9.51 billion and $9.57 billion for the fiscal year, compared to a previous range of $9.44 billion to $9.51 billion.
Lululemon expects profits to be between $12.02 and $12.17 per share for the year, compared to a previous range of $11.74 to $11.94.
For the current quarter, the retailer expects earnings per share of $2.23 to $2.28 and sales of $2.17 billion to $2.19 billion, in line with analyst expectations, according to Refinitiv.
Here’s how Lululemon did in its fiscal second quarter compared to Wall Street expectations, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.68 today stands at 2.54 $
- Income: $2.21 billion against the expected $2.17 billion
The company’s reported net income for the three months ended July 30 was $341.6 million, or $2.68 per share, compared with $289.5 million, or $2.26 per share, a year earlier.
Sales rose to $2.21 billion, up about 18% from $1.87 billion a year earlier.
The highs and lows were fueled by strong growth internationally. The retailer saw sales jump 52% in markets outside of North America, boosted by a 61% increase in China. That is up from 30% growth in the sector in the previous quarter.
Lululemon’s chief financial officer, Meghan Frank, said there was little volatility in the sector during the quarter. She described the sales growth as “strong” and “healthy”, even as China’s economy slows with retail sales up just 2.5% year over year since last July.
CEO Calvin McDonald said both e-commerce and in-store sales are performing “extremely well” in China.
The retailer now has 107 stores in the country, and of the 35 they plan to open internationally in this fiscal year, the majority will be in the region, said McDonald.
Sales in North America were up 11%. Meanwhile, same-store sales across the global industry fell short of expectations: Comparable sales rose 11% in the quarter, compared to estimates of a 12.1% increase, according to StreetAccount.
Lululemon has adopted an ambitious growth plan – its “Power of Three x2” strategy – which calls for sales to double to $12.5 billion by 2026 compared to 2021’s revenue of $6.25 one billion. To get there, the retailer has been working to expand its brick-and-mortar footprint and double its men’s and direct-to-consumer revenue.
Sales in the men’s category were up 15% in the quarter, and the retailer opened 10 new stores on a net basis, including its first in Thailand. By the end of the season, it had 672 stores worldwide.
It has also been working to address an ongoing inventory glut, with year-over-year levels continuing to decline. In its second quarter, investments rose 14% to $1.7 billion, compared to $1.5 billion in the fourth quarter a year ago. The strong sales helped move inventories, as well as lower air freight costs, Frank said.
Although conversion rates are still slightly slower than historical rates, the company said they are in a good position in terms of cash and the level of their investments, she said.
Direct-to-consumer revenue was up 15% but was a smaller part of Lululemon’s overall channel mix in the quarter. Direct-to-consumer sales represented 40% of Lululemon’s total sales, compared to 42% in the prior year.
Lululemon’s gross margin was largely in line with expectations at 58.8%, compared with the 58.5% analysts were expecting, according to StreetAccount.
Read the full earnings release here.
