Lululemon stock rose more than 13% in expanded trading Wednesday after the sportswear maker reported second-quarter earnings and sales that exceeded analysts’ expectations.
Consumers purchase sports bras, sweatpants, and leggings for their home wardrobes from Lululemon stores and the company’s website. But many also look for stretchy pants and comfortable clothes when they return to the office. Retailers such as Lululemon and Nike are benefiting from the shift towards so-called athleisure.
Lululemon offered a better-than-expected outlook for the third quarter and fiscal 2021, and expected momentum to increase. Based on its current forecast, Lululemon is now well on the way to surpassing its sales target for 2023 by the end of this year, two years ahead of schedule.
Chief Executive Officer Calvin McDonald told analysts during a conference call on the results that the company would release new financial targets after the holiday season.
Here’s how the company performed compared to Wall Street’s expectations based on a refinitive poll of analysts:
- Earnings per share: adjusted $ 1.65 versus expected $ 1.19
- Revenue: $ 1.45 billion versus an expected $ 1.34 billion
Net income for the three-month period ended August 30 rose to $ 208.1 million, or $ 1.59 per share. That’s an increase of $ 86.8 million, or 66 cents per share, a year earlier. Excluding one-time effects, the company made $ 1.65 per share. That’s better than the $ 1.19 that the analysts surveyed by Refinitiv were looking for.
Revenue increased 61% to $ 1.45 billion from $ 902.9 million in the same period last year. That was above expectations of $ 1.34 billion.
Sales in North America increased 63% year over year and international sales increased 49%.
“Our second quarter performance was driven by a strong response to our product offering, improved store productivity and continued strength in e-commerce,” CFO Meghan Frank said in a statement.
The company, which also owns the Mirror home fitness machine, remains on track to double its men’s business this year and quadruple its international business by 2023.
On a biennial basis, Lululemon reported that women’s business grew 26% while men’s business grew 31%.
It didn’t break Mirror product sales in the final quarter, however. It currently has mini mirror shops in 150 Lululemon stores and will increase that to 200 before the holidays.
Much like Peloton, Lululemon said it now needs to spend more money marketing Mirror as competition intensifies in the connected fitness product category.
Lululemon expects third quarter revenue of $ 1.4 billion to $ 1.43 billion with adjusted earnings per share of between $ 1.33 and $ 1.38. According to Refinitiv, analysts were looking for Lululemon to make $ 1.32 per share on $ 1.32 billion in revenue.
For the fiscal year, the company expects sales between 6.19 and 6.26 billion US dollars. Adjusted earnings per share are projected to range between $ 7.38 and $ 7.48. Analysts had expected Lululemon to make $ 6.91 per share on revenue of $ 5.94 billion.
Lululemon said his outlook does not take into account the future impact of Covid. The company also admitted that it is still facing supply chain constraints. Congested ports and a shortage of freight containers and truck drivers, among other challenges, have left gaps in retail inventory levels across the industry.
Lululemon said it is prioritizing making key fall styles and using more air freight to ease pressure and bottlenecks. It expects temporarily closed factories to reopen in South Vietnam later this month, which should also help the situation.
At the close of trading on Wednesday, Lululemon’s shares were up about 9% year-to-date.
Recently, the stock has fallen from an all-time high of $ 417.85 it hit late last month. Lululemon’s market capitalization is nearly $ 50 billion.
Find the full press release on Lululemon’s results here.