The Vancouver, British Columbia-based athletic apparel and accessories company revealed quarterly results Thursday afternoon, improving on top and bottom lines while logging more than $1 billion in revenues.
“Our third-quarter results demonstrate the strength of Lululemon across channels and markets, both in North America and around the world,” Calvin McDonald, the firm’s chief executive officer, said in a statement. “Our product innovations, investments in the e-commerce business and strategic acquisition of Mirror position us well to serve our guests as their needs evolve across both physical and digital experiences.”
In fact, the retailer outperformed in nearly all channels. For the three-month period ending Nov. 1, total company revenues increased 22 percent to more than $1.1 billion, compared with $916 million the same time last year. Total comparable sales increased 19 percent during the quarter, while direct-to-consumer net revenue surged 94 percent, year-over-year.
McDonald added on Thursday evening’s conference call with analysts that sales in the women’s division grew 22 percent during the quarter — back to pre-COVID-19 levels — while revenues in men’s were up 14 percent.
It was only comparable store productivity that fell about 17 percent during the quarter. But McDonald added on the call that Lululemon had strong e-commerce sales during the quarter, including e-commerce comps in Europe up 160 percent year-over-year and record online sales during Black Friday weekend, offsetting declines in store traffic.
The company logged $143 million in profits, up from $125 million the same time last year, as a result.
“Our performance this quarter was driven by strong omni momentum, with notable strength in conversion and increased traffic to our e-commerce sites,” said Meghan Frank, chief financial officer. “We have planned the fourth quarter based on multiple performance scenarios and believe we are well positioned for the holiday season.”
The ath-leisure craze and workout-from-home trends, which continue with no end in sight, have helped Lululemon gain a stronger foothold in the market against sportswear giants such as Nike Inc. and Adidas. In addition, the retailer purchased Mirror, the at-home fitness system, for $500 million in June. The company anticipates Mirror will generate revenues of about $150 million in 2020.
“We’re just at the beginning of our journey with Mirror,” McDonald said on the call.
“Our brand is becoming stronger,” he added. “Our guests are living a more active life. We are in the early innings of that addressable market and winning at a greater rate than others. There are a number of growth drivers that we anticipate will continue in 2021.”
He credited international expansion and strength in the product pipeline as a growth drivers, including women’s bras, yoga mats (the company plans to soon release a 3-D-version mat) and footwear, which is coming in 2022.
The retailer has also recently added several members to its senior leadership team, including Stacia Jones as the firm’s first vice president, global head of inclusion, diversity, equity and action, and Frank, the company’s first female cfo.
Lululemon ended the quarter with $481 million in cash and cash equivalents and 515 company-operated stores, about 95 percent of which were open during the quarter.
“We are bullish on stores as stores remain an important part of Lululemon’s growth story,” Celeste Burgoyne, president of Americas and global guest innovation, said on the call.
The number of stores in Mainland China, for example, has tripled in the last few years, McDonald said on the call. The company now plans to open between 30 and 35 stores in the coming year, in addition to about 100 holiday pop-ups during the current quarter. Lululemon also has 18 Mirror shops-in-shop, but McDonald said on the call that he expects those will grow to hundreds in the coming year.
Lululemon shares, which closed up 1.52 percent on Thursday to $369.07, are up more than 58 percent year-over-year. The company is not providing forward-looking guidance, but analysts are bullish on the stock.
“Lulu is one of retail’s best growth stocks,” Jay Sole an analyst at UBS, wrote in a note. “The company has a dominant brand, [international] growth potential and category tailwinds. We forecast Lulu delivering [positive high single digits] percentage annual comp growth, on average, over the next four years, post COVID-19. The keys are one, the athleticwear category likely continues to take share and, two, Lululemon has very strong brand loyalty and product execution capabilities, which should help it outgrow other brands.”