Lululemon Powers On, Topping Estimates and Raising Its Outlook
The economic realities of the moment — with worried consumers, high inflation and high interest rates — don’t seem to apply to Lululemon Athletica Inc.
Shares of the buzzy active company shot up 13.7 percent on Thursday to $373.37 after it continued to grow rapidly, topping first-quarter profit and sales projections and raising its outlook for the year.
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That puts Lululemon’s market capitalization at about $47.5 billion, one of the highest valuations in all of fashion, although still less than half of active leader Nike with a market cap of $159.3 billion.
But the idea certainly seems for Lululemon to catch up.
The company’s earnings jumped 53 percent to $290.4 million, or $2.28 a share — 32 cents ahead of the $1.96 analysts projected, according to FactSet. And revenues for the quarter ended April 30 jumped 24 percent to $2 billion from $1.6 billion, nearly $77 million above analysts’ expectations.
Comparable-store sales increased 17 percent on a constant currency basis, showing the company is growing new and existing doors. Lululemon opened 83 stores over the past year for a total of 662 locations.
Chief executive officer Calvin McDonald stressed the importance of those stores — and the communities they anchor — to the Lululemon model on a conference call with analysts.
McDonald said the company ramped its community events back to pre-pandemic levels and recently revealed its Further Initiative featuring an ultramarathon for women on International Women’s Day next March.
The brand also connects with its Lululemon Studio app — which grew out of the company’s acquisition of Mirror, which proved to be a rare stumble and led to a $443 million write off last quarter.
“We view our community model as one of our biggest competitive advantages with connection points across both the physical and digital, our ecosystem powered by membership supports our leadership position in developing and cultivating omni-guest relationships,” McDonald said. “We engage with guests in ways that are more than just transactional by creating deeper connections and more holistic relationships. This in turn builds our brand awareness, drives purchases and contributes to our strong financial performance.”
McDonald argued that the drivers of the company’s business are both unique and stable and include a direct to consumer omni operating model, product innovation and versatility with looks that can be worn for both workouts and work.
A lot of brands have similar claims, but are matching Lululemon’s results.
“If we zoom out, the drivers of our business pre, during and post the pandemic are still very relevant today,” McDonald said. “That is the importance of product versatility as it relates to apparel, guests living an active and healthy lifestyle, convenience expected by our guests — which really speaks to our strength in an omni operating model that we’ve been investing in for many years — and then finally focus on both physical, mental and social well-being all supporting the brand positioning.”
It seems all of that adds up to more for Lululemon.
The company boosted its outlook for the year and is now looking for earnings per share ranging from $11.74 to $11.94, up from the $11.50 to $11.72 projected in March. Likewise, the revenue projection crept up to a range of $9.44 billion to $9.51 billion, up from $9.3 billion to $9.41 billion.
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