Lululemon Athletica LULU released its second-quarter financial results on Sept. 8 after the market closed. The company posted stronger-than-expected earnings and revenue in the quarter courtesy of strong e-commerce performance.
Performance at a glance
The athletic wear maker specializing in yoga products recorded adjusted earnings per share of $0.74 in the second quarter. Analysts had called for earnings of $0.55 per share. Revenue of $902.9 million inched up 2% on a year-over-year basis and surpassed estimates of $842.5 billion.
Digital sales were up a mammoth 157% during the quarter. In addition, direct-to-consumer sales were up 155% on a year-over-year basis to $554.3 million, accounting for 61.4% of the company's total quarterly revenue. In contrast, sales at company-owned stores plunged 51%. The company's CEO Calvin McDonald commented the following on the performance:
"We're pleased with our overall business results for the second quarter, as lululemon increasingly lives into its Omni potential. As trends around the world are shifting to working and sweating from home with an increased focus on health and wellness, we believe 2020 is likely an inflection point for retail and for lululemon. We are cautiously optimistic with regard to the second half of the year as we continue to navigate the uncertain environment."
Key insights
Due to the pandemic, the company shut down all stores in Mainland China in February for a temporary period. As the outbreak has eased in China, the company has reopened all its stores.
Besides China, the company shut down all retail stores in North America, Europe and certain countries in the Asia Pacific region in March. The company started opening its retail stores in these markets during the second quarter of fiscal 2020. As of Aug. 2, as many as 492 company-operated stores were open.
Shifting gears, the retailer announced in June that it would acquire the at-home fitness company Mirror in a deal valued at $500 million. Mirror sells a $1,500 high-tech mirror, fixed to a wall, which is meant for streaming workout classes. The deal was closed in early July, which marked company's first acquisition. The deal aims to target customers engaged in at-home workouts, with a boost from the pandemic. The company expects Mirror to generate over $150 million in revenue this fiscal year. That compares with its previous estimate of more than $100 million.
At the end of the quarter, Lululemon had cash and cash equivalents of $523 million. In addition, the company had $697.7 million under its undrawn revolving credit facility.
Guidance
The company did not issue any guidance figure for fiscal 2020.
Disclosure: I do not hold any positions in the stocks mentioned.
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