- Lululemon experienced strong demand in the third quarter, driven by a 49% increase in international sales, but its shares declined in extended trading due to a cautious outlook for the upcoming fourth quarter.
- Sales for the third quarter reached $2.2 billion, a 19% increase from the previous year’s $1.86 billion.
- The sales growth included a 12% increase in North America and, though the fourth-quarter sales guidance of $3.14 billion to $3.17 billion fell short of the expected $3.18 billion.
- Lululemon reported a 13% increase in total comparable sales during the third quarter, exceeding the 12.4% analysts had anticipated. Direct-to-consumer sales saw a significant 18% spike, surpassing the anticipated 16.9%.
- Adjusted earnings per share were reported at $2.53, with revenue hitting $2.20 billion, slightly exceeding the analysts forecasts of $2.19 billion.
- Net income was $249 million, or $1.96 per share, compared to $255 million, or $2 per share, in the same period the previous year. The gross margin increased 110 basis points to 57.0%, with the adjusted gross margin increased 220 basis points to 58.1%.
- Lululemon anticipates earnings between $4.85 and $4.93 per share for the year, compared to analyst estimates ranging from $4.80 to $5.19. Full-year sales expectations range from $9.55 billion to $9.58 billion, surpassing estimates of $8.11 billion to $9.90 billion. CEO Calvin McDonald highlighted Black Friday as the “single biggest day” in the company’s history.
- The company incurred $72.1 million in impairment charges related to winding down Mirror, a connected fitness company acquired during the Covid-19 pandemic, as part of a new partnership with Peloton.
- Lululemon is not a stock we own in the sportswear space particularly because of its hefty valuation (PE of 58x). We instead own Nike across global managed portfolios as well as the Cratos BCI WW flexible fund. The chart below illustrates just how powerful the Nike brand is globally relative to competitors.
By Lee Kern
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