Lululemon's Shares Soar as Yoga Apparel Company Bids Farewell to Challenging Period
U.S. growth might be slacking, but athletic wear retailer Lululemon reported robust sales in its international sectors, notably China, resulting in a 9% year-on-year increase in sales. This news and subsequent stock price boost have the company trading roughly 25% above its monthly figure, even though it's still about 21% in the red year-to-date. After stumbling in self-inflicted blunders throughout the year, Lululemon seems to have rebounded.
The company surpassed Wall Street predictions, declaring revenues of $2.4 billion against the anticipated $2.36 billion and showing a 9% yearly increase. Net income for the October 27-ended quarter reached $352 million, up from $249 million in the previous period.
Sales presented a picture of two markets: the domestic and U.S. markets faced slower sale growth, while international and particularly Asia presented progressive sales opportunities.
For the upcoming holiday season, Lululemon estimates revenue between $3.48 billion and $3.51 billion, indicating overall growth between 8% and 10% compared to the preceding year, roughly in line with analyst predictions.
Lululemon Holiday Sales Forecast
Despite this optimistic outlook, Lululemon CEO Calvin McDonald cautioned analysts, stressing the need for careful planning due to the abbreviated holiday shopping period.
"While we're satisfied with the start of the holiday season, we still have substantial volume weeks ahead. Given the shortened holiday shopping season, we remain thoughtful in our fourth-quarter planning," McDonald stated.
Perhaps this caution is warranted. Lululemon has faced adversity this year, yet it's not the only contender in this competitive landscape. Newcomers like Vuori and Alo Yoga have been snatching market share, and the UK's Gymshark recently announced plans to augment its U.S. presence. The road ahead for 2025 looks more daunting.
In addition, Lululemon faltered with its supply chain for a high-profile product launch in the early part of the year, missing out on U.S. sales due to inadequate color and size options. When the company released earnings in August, McDonald assured that the U.S. brand still maintained its strength, though conceded that the women's line had slowed because of insufficient new styles.
Lululemon China Market Growth
The company has relied on China for growth, which, thus far, has boosted sales across the entire business, leading to a 4% increase in company-wide comparable sales during the quarter. U.S. sales, however, showed a 2% decrease, compared to an impressive 25% increase in international sales. Overall American revenue grew 2% in the quarter, while international revenue jumped 33%.
While this is encouraging, the U.S. remains Lululemon's primary market, and international sales only amount to a small fraction of its entire revenue. To sustain growth, these numbers will need to translate to stronger sales in the long term.
"Our teams have been flexible and have pursued into seasonal colors, prints, and patterns," McDonald said, discussing the lessons learned from the company. "These efforts have contributed to the sequential improvement in newness within our assortment in the back half of the year...we continue to see substantial potential for growth in the U.S."
In response, Lululemon has turned to repurchasing its own shares to appease Wall Street. It approved a $1 billion increase to its stock repurchase program this month and still has approximately $1.8 billion accessible in the plan.
With the challenges seemingly behind it, Lululemon currently looks well-prepared for a strong holiday season, despite the CEO's subdued predictions.
The robust earnings report from Lululemon, including a 9% year-on-year increase in sales and surpassing Wall Street predictions, has led to a substantial boost in the company's stock price, with Lululemon trading around 25% above its monthly figure.
Despite the positive earnings and the company's strong performance in international markets, particularly in China, Lululemon's stock price is still about 21% in the red year-to-date, reflecting the challenges the company has faced throughout the year.
