Non-US markets and men’s drove Lululemon’s Q2 revenues, which fell short of expectations by $40 million and declined for a sixth consecutive period. However, the group’s quarterly gross margin rose by 80 basis points to 59.6 percent to exceed a consensus estimate of 57.7 percent, and the operating margin improved by 110 basis points to 22.8 percent. Period-end inventories were down by 14 percent year-over-year at $1.4 billion.
Nonetheless, Lululemon revised its annual outlook downward after reporting the results. The FY25 revenue range is now $10.375-$10.47 billion, at least 1.4 percent below a consensus estimate of $10.62 billion. The annual EPS range, meanwhile, was lowered by 2.2-2.3 percent to a range of $13.95 to $14.15 a share.
In Q2 ended July 28, operating income increased by 12.7 percent to $540.2 million from $479.3 million. Net income rose 15 percent year-over-year to $392.9 million from $341.6 million. Total revenues improved 7.3 percent to $2.37 billion from $2.21 billion with non-US markets leading the growth.
Constant-currency sales in China rose by 28 percent year-over-year to $356.2 million; increased by 8 percent in Canada to $319.5 million; and jumped a whopping 29.0 percent in the Rest of World to $273.4 million. In the US, the brand’s largest market, year-over-year sales were essentially flat at nearly $1,422 million.
By product category, men’s year-over-year sales jumped by 10.7 percent to $587.5 million but declined by 12.9 percent for women’s products at $1.22 billion. Sales of other categories increased by 9.0 percent to $307.4 million.
In a statement, CEO Calvin McDonald said Lululemon feels “confident in the long runway in front of us as we execute on our Power of Three x2 growth plan.” That strategy calls for the group to double its 2021 net revenue of $6.25 billion to $12.5 billion by 2026 through product innovation, guest experience, and market expansion.
