Lululemon Athletica (LULU, Financial) released its first-quarter results on June 3 after the market closed. The company posted stronger-than-expected earnings and revenue, 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.
The key numbers
The athletic wear maker specializing in yoga products recorded adjusted earnings per share of $1.16 in the first quarter. Analysts had predicted earnings of $0.91 per share. Revenue of $1.23 billion increased 88% on a year-over-year basis and surpassed estimates of $1.13 billion.
Digital sales were up a solid 50%. This was, however, down from the 92% growth reported in the previous quarter. Direct-to-consumer sales were up 55% on a year-over-year basis to $545.1 million, accounting for 44.4% of the company's total quarterly revenue.
Reflecting on the company's performance, CEO Calvin McDonald said:
"Our first quarter results reflected strength across all drivers of growth, fueled by the continued expansion in our e-commerce business and a rebound in brick and mortar stores. Our strong performance across categories, channels and geographies demonstrates the momentum and strength of lululemon as we shift into the new normal. All of us on the leadership team are grateful to our teams around the world who enabled these results, and who continue to focus on realizing growth."
At the end of the quarter, Lululemon had cash and cash equivalents of $1.2 billion. In addition, the company had $397.3 million under its undrawn revolving credit facility.
Covid-19 impact
Due to the pandemic, the company temporarily shut down all stores in China in February 2020. As the outbreak has eased, Lululemon 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 2020. The company started reopening its retail stores in these markets during the second quarter of fiscal 2020. Nearly all the retail stores were operative by the third quarter. Lululemon witnessed a few temporary closures in certain markets subsequent to Nov. 1 and is operating with tighter capacity restrictions. As of Jan. 31, as many as 523 company-operated stores (barring retail locations operated by third parties) were open.
Mirror acquisition
The retailer announced last June that it was acquiring at-home fitness company Mirror in a deal valued at $500 million. Mirror sells a $1,500 high-tech mirror that is fixed to a wall, which is meant for streaming workout classes. The deal was closed in early July last year, which marked the company's first acquisition. The deal aims to target customers engaged in at-home workouts.
Mirror generated $170 million in revenue in 2020, which was more than the company's own forecast of $150 million. This year, the company expects Mirror to generate revenue of around $250 million to $275 million.
Guidance
Lululemon has issued guidance figures for its fiscal second quarter. The company projects net revenue will fall within the range of $1.30 billion to $1.33 billion. Adjusted earnings per share are anticipated to be between $1.10 and $1.15.
For 2021, the company is guiding for revenue of around $5.825 billion to $5.905 billion. Analysts predict the metric to be $5.68 billion. Adjusted earnings is anticipated to be between $6.73 and $6.86 per share. Analysts forecast earnings of $6.48 per share.
