Lululemon Q3 sales, earnings top estimates despite supply chain challenges

Lululemon Athletica reported better-than-expected third-quarter sales and earnings and boosted its full-year outlook

Net income rose to $187.8 million, or $1.44 per share, in the quarter ended Oct. 31, from $143.6 million, or $1.10 per share, in the year-ago period. Adjusted earnings were $1.62 per share, topping expectations for $1.41. Lululemon Q3 sales, earnings top estimates despite supply chain challenges

Sales rose 30% to $1.45 billion from $1.12 billion a year earlier, topping estimates of $1.41 billion. The increase was driven by a 44% increase in Lululemon’s men’s business. Sales in its women’s business rose 25%.

Total comparable sales rose 32%. Comparable store sales increased 32%.

Direct to consumer net revenue increased 23% to $586.5 million. It represented 40.4% of total net revenue compared to 42.8% in the third quarter of 2020.

In a statement, CEO Calvin McDonald said he was “pleased” with the company’s early holiday season performance. On the company’s earnings call, he noted that “there are some big weeks ahead” and “we’re pleased with our position.” He also told analysts that Lululemon’s online sales on Thanksgiving Day were its highest in a single day on record. But the company also cited supply chain issues that have resulted in some of its merchandise categories being understocked.

During the quarter, the retailer launched a program to support mental wellness. It also advanced its goal of sourcing 100% renewable electricity across its direct operations in North America by 2021.

For the fourth quarter, Lululemon expects revenue to range from $2.13 billion to $2.17 billion, and adjusted earnings per share between $3.25 and $3.32. Analysts had expected sales of $2.17 billion and earnings of $3.30 per share.

The company raised its full-year revenue outlook to between $6.25 billion and $6.29 billion, up from its previous outlook of $6.19 billion to $6.26 billion. Analysts had been forecasting sales of $6.27 billion.

"Our teams continue to execute at a high level, which has enabled our strong Q3 performance and the upward revision to our guidance,” said CFO Meghan Frank. “We are pleased with these results given the ongoing, industry-wide supply chain issues we continue to navigate. While there are several large volume weeks ahead of us, we feel well-positioned for a strong end to 2021."

Lululemon operated 552 stores as of the end of the third quarter.