Lululemon momentum continues in Q3; comp sales up 22%
Lululemon Athletica reported sales and earnings that topped estimates as consumers continued to buy its pricey goods.
The athleisure, accessories and footwear brand, however, noted the “challenging” environment for sales and provided softer-than-expected guidance for the holiday quarter.
On the company’s earnings call, McDonald said that Black Friday was “the biggest day in our history in terms of our revenues and traffic.”
“We also recognize that the external environment remains challenging with several high-volume weeks still in front of us,” he added.
Lululemon’s quarterly ending inventory increased 85% to $1.7 billion, up from $900 million last year.
“As we discussed, our inventory levels were too lean last year,” McDonald told analysts on the call, adding that the company made the strategic decision to build inventories this year, “which enabled the strong top-line growth we have delivered,” McDonald said the company is now well-positioned to be in stock throughout the holidays.
Lululemon earned $735 million, or $2.00 a share, in the quarter ended Oct. 30, compared with $541 million, or $1.44 a share, in the year-ago quarter. Adjusted earnings came to $1.62 a share.
Revenue rose 28% to $1.9 billion, topping estimates of $1.81 billion.
Total comparable store sales rose 22%. Comparable store sales increased 14%.
Direct-to-consumer net revenue increased 31%, and represented 41% of total net revenue.
“We are proud to have delivered another quarter of strong sales and earnings growth, despite an operating environment that remains dynamic,” stated CFO Meghan Frank. “These results illustrate the strength and differentiation of our omni operating model and position us well to deliver ongoing value for our stakeholders. We look forward to a strong finish to our fiscal year."
In the earnings statement, McDonald said that the company looks forward “to all that’s ahead for lululemon as we continue to deliver on our Power of Three ×2 growth plan."
Lululemon’s growth plan calls for a doubling of the business from 2021 net revenue of $6.25 billion to $12.5 billion by 2026. The key pillars of the strategy include product innovation and a plan to double men's, double direct to consumer, and quadruple international net revenue relative to 2021. In September, the company expanded its presence in Paris, opening a flagship (its first in Continental Europe) on the Avenue Champs-Elysées.
[Read More: Lululemon aims to double revenue by 2026; launching two-tier monthly memberships]
Lululemon ended the quarter with $352.6 million in cash and cash equivalents and the capacity under its committed revolving credit facility was $394.8 million.
The company forecast fourth-quarter revenue between $2.605 billion and $2.655 billion, and adjusted earnings per share between $4.20 and $4.30.
For the full year, the company expects revenue between $7.944 billion and $7.994 billion, and adjusted EPS between $9.87 and $9.97. FactSet consensus calls for EPS of $9.92 on sales of $7.935 billion.
Lululemon ended the quarter with 623 stores.