Lululemon Q3 Earnings: Stocks Jump On Earnings Beat As Men’s And International Growth Drive Top Line

by Trefis Team
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Lululemon Athletica
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Continuing with their positive run last quarter, Lululemon Athletica (NASDAQ:LULU) posted a great quarter this time around. The company managed to beat the earnings estimate by a notable margin, while revenues came in over 14% higher than in the same period last year.

At the start of the year, the company’s stock price fell by almost 25% on the back of disappointing store comp sales and slowing e-commerce momentum. However, the yoga pants manufacturer has worked hard over the last six months to make amends, and the market has rewarded them for their efforts. The company witnessed a near 7% jump in the stock price post the earnings call.

For Q4, Lulu expects revenues in the range of $870 million to $885 million, and earnings in the range of $1.18 to $1.21 per share. Whereas for the full-year, the retailer is now forecasting $2.55 billion to $2.6 billion in revenue, with comparable store sales increasing in the low single digits. Excluding charges from the ivivva closings, Lululemon expects full-year earnings to fall somewhere between $2.45 to $2.48 per share, up from its previous estimate of $2.35 to $2.42 per share.

Key Highlights:

  • The company had previously spoken about how improving its online presence is key in order to improve overall sales. In this respect, Lululemon delivered exceptionally in the quarter. The apparel retailer was able achieve significant acceleration in Q3, with constant dollar comps up almost 25% spurred on by double digit increases in traffic and transactions. The quarter also recorded the company’s best digital conversions in the year thus far.
  • Judging by the the results in Q3, it seems as though all the hard work in respect to expanding the men’s business is working out well for Lululemon. In the last three months, the company witnessed a 21% increase in new male customer transactions. This was primarily made possible thanks to additional focus on their co-located stores, and their very first men’s marketing campaign.
  • China is key to Lululemon, and it seems like the company is making great strides in the region thus far. While market growth in Asia was recorded at a commendable 100%, growth in China came in at a whopping 450%. Furthermore, the company believes that current customer behavior is indicative that its e-commerce penetration in China could approach a significant 40% to 50% of its business in the region very soon. This is primarily driven by the company’s continued efforts to grow and enhance its distribution channel, including Tmail and WeChat, and targeted digital marketing campaigns.

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