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Mayank Marwah
Mayank Marwah
Articles (1050) 

Lululemon Athletica's Profit Tops Estimates

Digital sales jumped 93% in the quarter

December 11, 2020 | About:

Lululemon Athletica (NASDAQ:LULU) released its third-quarter financial results on Dec. 10 after the market closed. The company posted stronger-than-expected earnings and revenue in the quarter courtesy of strong e-commerce performance. Results were also aided by the growing demand for yoga products as more people engaged in at-home workouts.

A look at the key numbers

The athletic wear maker specializing in yoga products recorded adjusted earnings per share of $1.16 in the third quarter. Analysts had predicted EPS of 88 cents. Revenue of $1.12 billion increased 22% on a year-over-year basis and surpassed estimates of $1.02 billion.

Digital sales were up a mammoth 93% during the quarter. In addition, direct-to-consumer sales were up 94% on a year-over-year basis, accounting for 42.8% of the company's total quarterly revenue. Revenue from the Men's category grew 14%, while the women's section rose 22%.In contrast, sales at company-owned stores plunged 17%.

Reflecting on the company's performance, CEO Calvin McDonald had the following to say:

"Our third quarter results demonstrate the strength of lululemon across channels and markets, both in North America and around the world. Our product innovations, investments in the e-commerce business, and strategic acquisition of MIRROR position us well to serve our guests as their needs evolve across both physical and digital experiences."

At the end of the quarter, Lululemon had cash and cash equivalents of $481.6 million. In addition, the company had $697.3 million under its undrawn revolving credit facility.

Covid-19 impact

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. Nearly all the retail stores were operative during the fiscal 2020 third quarter. Lululemon, however, witnessed a few temporary closures in certain markets subsequent to Nov. 1 and is operating with tighter capacity restrictions. As of Nov.1, as many as 515 company-operated stores (barring retail locations operated by third parties) were open.

Mirror acquisition

Shifting gears, the retailer announced in June that it would acquire 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 the company's first acquisition. The deal aims to target customers engaged in at-home workouts. The company expects Mirror to generate over $150 million in revenue this fiscal year.

Guidance

Lululemon did not issue guidance figures for full fiscal 2020. For the fourth quarter, however, the company sees revenue to grow in the range of the mid-to-high teens percentage.

Disclosure: I do not hold any positions in the stocks mentioned.

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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