Lululemon Athletica (LULU, Financial) is now one of the leading luxury athletic apparel retailers. Its shares have risen by 61% in the last year. The company proved its worth once again when it reported its first-quarter results. The numbers were much ahead of the Street’s expectations as both the top line and the bottom line surged. Also, the retailer raised its guidance for the year, impressing the investors even more. The blockbuster quarter and an upgraded guidance resulted in a sharp increase in its share price. Let’s get into the details.
The impressive numbers
Revenue for the quarter was up by 10% over last year, clocking in at $423.5 million. This was much better than the analysts’ estimate of $418 million. The top line was driven by two categories, namely, the men’s apparel business and the e-commerce segment.
The online sales of the company have been growing at a fast pace. Thus, it now makes 20% of the total revenue of the company. This is much higher than 7% of total sales, a few years back. The company has a robust ecommerce platform which has helped the segment grow. Also, the supply chain of the company is faster, which attracts more customers. In fact, total revenue from the direct to consumer segment jumped 27% to $83.6 million, over the prior year.
The men’s category, too, was a star performer with a 19% increase in its comp sales. Demand for its menswear is on the rise. It will be adding new menswear sections in its existing stores and expanding its product portfolio. Moreover, the retailer will be adding stand-alone men’s stores to its network.
Another key driver during the period was the addition of 14 new stores to its store network. This resulted in higher sales. The total comp sales of the company increased 6% during the quarter, mainly driven by a 31% surge in direct to consumer revenue, partly offset by a decline of 1% in comp store sales.
The gross margin of the retailer dropped to 48.6% from 50.9% in the previous year. The earnings of the company stood at $0.34 per share, better than the analysts’ estimate of $0.33 per share and was helped by an increase in the top line.
The journey got better
Lululemon has come a long way from a time when it was criticized for offering see through long pants, which hurt the sentiments of the customers and needed to be recalled.
However, now the customers seem to have forgotten the past and are getting attracted to its products, especially the new menswear. Further, the retailer plans to expand its international footprint and will get into new regions. Also, it will be expanding into swimwears.
E-commerce too is one of the company’s main focus points. It plans to heavily invest in the e-commerce segment and will redesign its website which will finish by the end of this year.
Thus, Lululemon is optimistic about its future, leading to a revision in its outlook for the year. Its revenue is expected to be in the range of $2 billion to $2.05 billion and earnings will be in between $1.86 per share and $1.91 per share.
Summarizing …
The athletic apparel retailer’s products have been resonating well with the customers. Also, its supply chain is efficient enough to deliver the products in the shortest time possible. Further, the company’s efforts to grow its business through product and geographic expansion look impressive. Additionally, it repurchased 0.3 million shares in the last quarter, which made investors happy. All these factors together, make Lululemon an attractive bet.
