Lululemon Athletica Inc. on Thursday reported quarterly earnings and revenue that beat analysts’ expectations, as shoppers stocked up on workout gear even as surging prices have hurt other retailers’ apparel sales.
The company also raised its outlook for the year. Shares rose about 9% in off-hours trading.
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Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.20, adjusted, vs. $1.87 cents expected
- Revenue: $1.87 billion vs. $1.774 billion expected
Same store sales grew 23%, which beat StreetAccount’s estimate of 17.6%. Net sales rose 29% to $1.87 billion. The company said that traffic remains strong both in stores and online, even as surging inflation cramps consumers’ spending.
Lululemon has a higher-income customer base that seems mostly unfettered by inflationary pressures. Still, other higher-end retailers like Nordstrom and Macy’s slashed their outlook this quarter on fears of slowing demand. Lululemon, on the other hand, has boosted its guidance in two consecutive quarters.
“Despite the challenges around us in the macro-environment, guest traffic in our stores and on our e-commerce sites remains robust, which speaks to the strength of our multi-dimensional operating model,” Chief Financial Officer Meghan Frank said in a news release.
Store traffic increased over 30%, and ecommerce traffic rose over 40%, executives said on the earnings call Thursday. The company is hoping to boost customer loyalty with a soon-to-launch membership program.
The membership program was announced at the end of the first quarter. It has a free tier and a $39 per month paid tier which give subscribers early access to product drops and exclusive items, as well as invitations to in-person events.
The company said the traffic increases were not attributable to promotional programs or product markdowns.
“We have not changed our promotional cadence,” CEO Calvin McDonald said on the earnings call. “We have no plans to do so.”
Lululemon continued brick-and-mortar expansion during the quarter, with 21 net new stores for a total of 600 locations.
Inventories were up 85% to $1.5 billion compared to the same period last year, but the company said it was “under-inventoried” at the time due to supply chain bottlenecks.
Retailers in general have had to contend with swelling inventory levels as shoppers adjust their spending habits. Lululemon said Thursday it is confident the inventory level will help it boost sales during the holiday shopping season.
The company said it now expects 2022 revenue of between $7.865 billion and $7.940 billion, up from the range of $7.610 billion to $7.710 billion it stated last quarter. The company also raised its adjusted earnings per share outlook to a range of $9.75 to $9.90, from last quarter’s guidance of $9.35 to $9.50 adjusted.
The release also maintained the company’s long-term outlook of doubling net revenue to $12.5 billion from from 2021 to 2026. The plan includes an expansion of its menswear business, footwear, and membership-based fitness classes. Upon the plan’s announcement in the spring, some analysts were skeptical about Lululemon’s ability to achieve the lofty longer-term target.
Lululemon touted some early success with the plan. It launched new shoes during the quarter, while its men’s business saw 27% growth. The company also reported growth across all of the countries in which stores are currently active.
Read the earnings release here.