A customer enters a Lululemon store on June 02, 2023 in Corte Madera, California.
Justin Sullivan | Getty Images
Lululemon raised its full-year guidance Thursday after reporting an 18% jump in each sales and profit for its fiscal second quarter, boosted by a 61% revenue spike in China.
The athletic apparel retailer now expects sales to be between $9.51 billion and $9.57 billion for the fiscal yr, in comparison with a previous range of $9.44 billion to $9.51 billion.
Lululemon is expecting profits to be between $12.02 to $12.17 per share for the yr, in comparison with a previous range of $11.74 to $11.94.
For its current quarter, the retailer is forecasting earnings per share of $2.23 to $2.28 and sales of $2.17 billion to $2.19 billion, in step with analysts’ expectations, in line with Refinitiv.
Here’s how Lululemon did in its second fiscal quarter compared with what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.68 vs. $2.54 expected
- Revenue: $2.21 billion vs. $2.17 billion expected
The corporate’s reported net income for the three-month period that ended July 30 was $341.6 million, or $2.68 per share, compared with $289.5 million, or $2.26 per share, a yr earlier.
Sales rose to $2.21 billion, up about 18% from $1.87 billion a yr earlier.
The highest and bottom line beats 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 within the region within the prior-year quarter.
Lululemon’s finance chief Meghan Frank said there was little volatility within the region through the quarter. She described the sales growth as “strong” and “healthy,” at the same time as China’s economy slows with retail sales up just 2.5% yr over yr as of this July.
CEO Calvin McDonald said each e-commerce and in-store sales are performing “incredibly well” in China.
The retailer now has 107 stores within the country, and of the 35 it plans to open internationally through the current fiscal yr, the bulk will probably be within the region, McDonald said.
Sales in North America were up 11%. Meanwhile same-store sales across the worldwide business fell in need of expectations: Comparable sales were up 11% within the quarter, in comparison with an estimate of up 12.1%, in line with StreetAccount.
Lululemon has undertaken an ambitious growth plan — its “Power of Three x2” strategy — that calls for sales to double to $12.5 billion by 2026 in comparison with 2021’s revenue of $6.25 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 boys’s category were up 15% through the quarter, and the retailer opened 10 recent stores on a net basis, including its first in Thailand. By the top of the quarter, it had 672 stores globally.
It is also been working to handle a persistent inventory glut, with year-over-year levels steadily coming down. During its second quarter, inventories were up 14% to $1.7 billion, compared with $1.5 billion within the year-ago quarter. The strong sales helped inventories move, in addition to lower air freight costs, said Frank.
While turnover rates are still a bit slower than historical levels, the corporate said it’s in a superb position with each the currency and level of its inventories, she said.
Direct to consumer revenue was up 15% however it was a smaller a part of Lululemon’s overall channel mix within the quarter. Direct to consumer sales represented 40% of Lululemon’s overall sales, in comparison with 42% within the yr ago period.
Lululemon’s gross margin was largely in step with expectations at 58.8%, in comparison with the 58.5% analysts had expected, in line with StreetAccount.
Read the total earnings release here.