A customer enters a Lululemon store in Corte Madera, California on June 2, 2023.
Justin Sullivan | Getty Images
Lululemon The company raised its full-year forecast on Thursday after reporting an 18% jump in revenue and profit for its fiscal second quarter, helped by a 61% rise in sales in China.
The sportswear retailer now expects revenue 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 to earn between $12.02 and $12.17 per share for the year, compared with a previous range of $11.74 to $11.94.
For the current quarter, the retailer forecast 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.
That’s how Lululemon did it second fiscal quarter compared to what Wall Street expected, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.68 vs. $2.54 expected
- Revenue: $2.21 billion versus expected $2.17 billion
The company’s reported net income for the three-month period ended July 30 was $341.6 million, or $2.68 per share, compared with $289.5 million, or $2.26 per share in the previous year.
Revenue rose to $2.21 billion, up about 18% from $1.87 billion a year ago.
The increases in sales and profits were due to strong international growth. The retailer reported a 52% increase in sales in markets outside North America, which rose 61% in China. That’s an increase from the region’s 30 percent growth in the year-ago quarter.
Meghan Frank, Lululemon’s chief financial officer, said there was little volatility in the region during the quarter. She described sales growth as “strong” and “healthy” even as China’s economy slows and retail sales rose just 2.5% year-on-year in July this year.
CEO Calvin McDonald said both e-commerce and in-store sales are doing “incredibly well” in China.
The retailer currently has 107 stores in the country and of the 35 stores it plans to open internationally in the current fiscal, the majority will be in the region, McDonald said.
Sales in North America increased 11%. Meanwhile, same-store sales across its global business fell short of expectations: comparable sales rose 11% in the quarter, compared with an estimate of 12.1%, according to StreetAccount.
Lululemon has pursued an ambitious growth plan – its “Power of Three x2” strategy – that calls for doubling sales to $12.5 billion by 2026, compared to sales of $6.25 billion in 2021 To achieve this goal, the retailer has worked to expand its brick-and-mortar footprint and double its men’s and direct-to-consumer sales.
Sales in the men’s category rose 15% in the quarter and the retailer opened a net 10 new stores, including its first in Thailand. At the end of the quarter, there were 672 stores worldwide.
Work is also underway to combat the ongoing inventory glut, with stocks steadily falling year-on-year. In the second quarter, inventories rose 14% to $1.7 billion, compared to $1.5 billion in the year-ago quarter. The strong sales helped shift inventory and reduce air freight costs, Frank said.
Although turnover rates are still slightly below historical levels, the company is in a good position both in terms of currency and the level of its inventory, she said.
Direct-to-consumer revenue rose 15% but accounted for a smaller portion of Lululemon’s overall channel mix in the quarter. Direct-to-consumer sales accounted for 40% of Lululemon’s total sales, compared to 42% in the year-ago period.
According to StreetAccount, Lululemon’s gross margin was largely in line with expectations at 58.8%, compared to the 58.5% analysts had expected.
Read the full earnings release Here.