Lululemon, with so many aspects of its balanced approach moving ahead positively, wants to grow its unaided consumer brand awareness around the globe. The company, while keeping its marketing spend “relatively stable,” intends to make further brand investments in H2 that will focus on digital media, in-store and targeted television in the U.S. Except for the UK and Australia, the brand’s unaided brand awareness is in the single digits internationally and at 25 percent in the U.S. Lululemon has 25 co-located stores in North America that are larger locations with broader assortments to capitalize on traffic.
Lululemon Athletica Inc. reported another strong quarter of results for the period ended June 30, with both revenues and earnings per share exceeding internal forecasts. In doing so, Lululemon elevated its FY forecast to 17 to 18 percent revenue expansion to a range of $9.51 to $9.57 billion and a diluted EPS range of $12.02 to $12.17.
Second quarter net revenues rose by 18 percent to $2.2 billion, including an 11 percent improvement in North America and 52 percent growth in all international markets, where sales in Greater China increased by 61 percent year-over-year and 107 doors were in operation. Markets outside the U.S. represented 22 percent of period sales, up from 17 percent in Q2/22 but below the company’s long-term target. During Q2, Lululemon opened its 100th store in APAC with a door in Bangkok and its second EMEA store in Amsterdam. The brand’s loyalty program now counts 12 million members in the U.S.
By segment, e-commerce sales rose by 17 percent on a constant currency basis to $893.7 million, and company-operated store revenue increased by 9 percent to $1.1 billion, fueled by increased traffic and partially offset by a lower conversion rate and lower dollars per transaction. Other revenues – outlets, sales to wholesale accounts and Lululemon Studio among the components – equaled $189.8 million or 10 percent of the period revenues.
Second quarter operating profit improved by 19.5 percent year-over-year to $479.3 million as gross margin expanded by 230 basis points to 58.8 percent from 56.5 percent, helped by a 330-basis-point increase in product margins due to lower freight costs that were partially offset by currency impact and logistics and product development investments. Net income was up by 18 percent year-over-year at $341.6 million.
The group, which realized balanced sales growth from its women’s (+16%) and men’s (+15%) segments and a 44 percent increase in accessories, says its pipeline of innovation and new product launches remain strong and predicted markdowns will be “relatively flat” this year. At Q2 end, Lululemon’s inventory was up 14 percent year-over-year at $1.66 billion. It is projected to be up by high single to low double-digits at Q3 end with inventories lining up with sales by Q4 end. In the men’s segment, where the ABC franchise showed strength in Q2, there are high sales expectations for the new Soft Jersey and Steady State collections and plans for an entry into footwear in 2024.
Lululemon Athletica estimates revenue of $9.51 to 9.57 billion in FY24. Experts had expected an average of $9.51billion.
