Dive Brief:
- As many in the retail industry report challenges, Lululemon outperformed in the second quarter, with revenue up 18% year over year to $2.2 billion. Comps were up 11%, according to a company press release.
- Profits were also up by double digits, with operating income growing 19% and net income increasing by 18% to about $342 million. Gross profit was up 23%, to $1.3 billion.
- Lululemon upped its store opening plans for the year, now aiming for 55 net new stores by the end of the year, compared to previous estimates of about 50. Twenty-three of them will open in Q3, Chief Financial Officer Meghan Frank said on a call with analysts.
Dive Insight:
On the back of 24% revenue growth last quarter, Lululemon once again delivered double-digit sales increases.
“Against a peer earnings backdrop characterized by warnings of consumer softness and higher shrink, Lululemon once again posted an impressive beat-and-raise quarter, with revenue beating the high end of guidance by 2% on continued broad-based strength across channels, categories, and geographies,” William Blair analysts led by Sharon Zackfia said in emailed comments.
The athletics retailer saw sales rise across categories, with its women’s business up 16%, men’s up 15% and accessories growing by 44%. International continued to surge, with revenue up 52%, and CEO Calvin McDonald said on a call with analysts that he expects it to make up about 20% of the company’s total sales going forward. The retailer’s more mature North America market also grew significantly, with sales up 11%.
“While outstanding, such growth is relatively easy to attain as Lululemon has a more embryonic presence outside of the Americas and so can quickly grow as it expands and takes share from rivals,” GlobalData Managing Director Neil Saunders said in emailed comments. “The reopening of China has also boosted international numbers. However, unlike many luxury brands which have leaned heavily into international to make up for weak domestic sales, Lululemon is doing well at home as well as abroad.”
Saunders noted that Lululemon’s growth is slowing somewhat, but the retailer is still “performing way better” than the wider retail industry and many of its peers. The retailer is planning to launch men’s footwear next year, and is expanding its presence on European e-commerce site Zalando. The retailer’s membership program, which launched about a year ago, now has 12 million members signed up and continues to “far exceed our expectations,” McDonald said.
Lululemon Studio and Mirror did not feature much on the call, though reports have swirled this year that the retailer could sell Mirror. In July, Lululemon laid off about 100 employees from the Lululemon Studio unit (which includes the Mirror hardware) as it integrated the company into its core business. Lululemon has said it is shifting to a more app-based fitness strategy and invested in increasing its workout content.
