Lululemon Lifts Guidance, Premium Prices Do Not Deter Customers

Scott Peters
03 Jun, 2022
New York City

Lululemon Athletica reported rising sales and income as affluent buyers kept buying premium products even after the end of pandemic restrictions. 

The premium sportswear retailer said first quarter revenues increased 32% to $1.6 billion on 24% comparable store sales. 

The sales performance confirmed the trend reported by other high end retailers including Nordstrom, Levi Strauss, and Bloomingdale unit owned by Macy's. 

Lululemon benefitted during the pandemic as many Americans were forced to stay home and sought for comfortable clothing. 

However, the demand for company's products continue to be strong despite most workers returning to office work and engage in other social activities.   

The premium apparel retailer said when compared on a three-year basis, first quarter revenues jumped 106% representing a compounded annual growth rate of 27%.  

Net income increased to $189.99 million or $1.48 a share compared to $144.9 million or $1.11 a share. 

Gross margin in the quarter declined to 53.9% from 57.1% and operating margin eased to 15.8% from 16.1% a year ago. 

Net revenues in North America increased 32% and in international segments rose 29%. 

Retail stores and online sales continued to attract new customers driving higher comparable store sales to 24% and direct sales to 32% in the quarter. 

Total comparable sales jumped 28% and grew 29% in constant currency. 

Direct sales increased to 45% of total sales from 44% a year ago. 

In the quarter, the company added 5 net new stores totaling store count to 579. 

Inventories at the end of the quarter surged 74% to $1.3 billion and rose 56% on a unit basis to mitigate supply chain disruptions. 

Stock Repurchase plan 

The Company repurchased 0.7 million shares of its own common stock at an average price of $328.40 per share for a total cost of $232.6 million. 

Guidance and Outlook 

The company guided second quarter 2022 revenues between $1.750 billion and $1.775 billion and diluted earnings per share between $1.89 and $1.94. 

Diluted earnings per share are expected between $1.89 to $1.94 in the second quarter, excluding the gain on the sale of an administrative office building, adjusted diluted earnings per share are expected to be in the range of $1.82 to $1.87. 

The retailer also revised full-year 2022 revenues higher to a range between $7.61 billion and $7.71 billion from the previous estimate between $7.49 billion and $7.62 billion. 

Diluted earnings per share are expected to be in the range of $9.42 to $9.57 for the full-year, and excluding the gain on the sale of an administrative office building, adjusted diluted earnings per share are expected between $9.35 to $9.50.

Company and Stock 

Lululemon Inc operates 579 stores worldwide including 71 stores in China and sells athletic apparel, footwear, and accessories for yoga, running, and other activities. 

After the release of earnings in premarket trading, Lululemon added 0.5% to $304.02 and in the year-so-far has fallen 22.4%.