Lululemon, a Canadian athletic apparel retailer, has reported its Q1 earnings, which surpassed Wall Street’s expectations. The company’s net income for the three-month period ending April 30 was $290.4 million or $2.28 per share, an increase from $190 million or $1.48 per share a year earlier. Sales rose 24% to $2 billion, up from $1.61 billion a year earlier. The company’s China revenue alone grew 79% from the year-ago period. This surge is attributed to improved sales trends in China and lower air freight costs. The company raised its full-year guidance, expecting revenue of $9.44 billion to $9.51 billion and full-year profit of $11.74 to $11.94 per share, beating analysts’ expectations.
Performance by Category
The company’s total comparable sales, which track digital revenue and sales at stores open for at least 12 months, were up 14% in the quarter, falling short of the estimated 15.1%. Women’s sales increased by 22%, men’s by 17%, and accessories by 67%. The retailer’s gross margins increased 3.6 percentage points to 57.5%, driven by a reduction in airfreight costs. By the end of the quarter, the inventory was up 24%, at $1.58 billion, expected to be up 20% in the next quarter. Although the inventory has been an ongoing issue for Lululemon, company executives have insisted that its inventories are in line with sales growth and that they are comfortable with their position.
The company expects to open 50 net new company-operated stores in the fiscal year, with 30 to 35 in international markets, primarily in China. The company caters to higher-income consumers who tend to fare better against macroeconomic pressure, but retailers across the industry have cited a pullback in discretionary spending and higher-ticket items. Lululemon has seen no changes in its customers’ shopping habits, with the metrics remaining strong, and no changes in cohort behavior in terms of frequency of purchase or engagement.
Last month, CNBC reported that Lululemon is looking to sell its at-home fitness business Mirror, which it acquired for $500 million in June 2020. The segment has since rebranded as Lululemon Studio but has been weighing on the company’s balance sheet. The company has acknowledged that the at-home fitness market has been under pressure and has begun pivoting the segment away from being solely hardware-focused. Recently, Lululemon launched a new digital app for Lululemon Studio, which costs the same as Peloton’s starting membership at $12.99 a month and gives customers access to its fitness classes without the need to buy its hardware.
Lululemon’s Q1 earnings surpassed Wall Street’s estimates, with revenue of $2 billion and earnings per share of $2.28. The company’s China revenue alone grew 79%, contributing to the better-than-planned financial performance. Although the total comparable sales fell short of street estimates, direct-to-consumer revenue increased to 16% from the prior-year period. The company’s inventory was up 24% at $1.58 billion, but company executives have insisted that its inventories are in line with sales growth. The company expects to open 50 net new company-operated stores in the fiscal year, with 30 to 35 in international markets, primarily in China. Recently, the company launched a new digital app for Lululemon Studio to pivot the segment away from being solely hardware-focused.
Leave a Reply