Lululemon reported solid Q3 results, including a 45 percent increase in operating income to $490.7 million and a 150-basis-point improvement in gross margin to 58.5 percent. The company is ahead of schedule on its $12.5 billion annual revenue target by 2026 and has increased its stock repurchase program by $1 billion.
Total Q3 revenues rose by 8.7 percent to nearly $2.4 billion from $2.2 billion with a 30 percent constant currency and a 24 percent comparable sales improvement in international markets pacing the way. Digital sales rose by 4 percent to $945 million or 39.5 percent of all revenues, with men’s sales up by 9 percent and women’s and accessories growing by 8 percent each. The company acquired its Mexican business, comprising 15 stores, during the period.
Americas’ sales increased by 2 percent on a constant currency basis, but the region’s comps declined by 2 percent as the U.S. number remained flat. Lululemon thinks it has corrected kinks in US operations by fully integrating it merchandising and brand teams and accelerating its focus on seasonal product newness that will commence in Q125. “Significant (brand) growth potential” is projected for the market that currently counts 24 million members and unaided brand awareness of 36 percent.
Elsewhere across the globe, Lululemon continues to see growing customer and brand momentum in China, where it has 15,000 guests participating in Q3 activations and plans to open most of its approximately 30 international stores this FY. In the rest of the world, which includes the EMEA and APAC, Q3 sales rose by 23 percent on a constant-currency basis, and comps jumped by 20 percent. Stores have been enlarged in Berlin and Oslo and new franchised doors will debut in Denmark, Belgium, Czech Republic, and Turkey in 2025. Italy, meanwhile, will be a company that is owned.
The company is now forecasting total year-over-year sales growth of 9 percent (7 percent when excluding a 53rd week) to $10.452-$10.487 billion. Pleased with results and traffic trends during Thanksgiving Weekend, Lululemon forecasts a “slightly improved” year-over-year markdown rate in Q4.
