Lululemon (LULU) Earnings Q1 2023 |usa4world

Lululemon on Thursday reported earnings that beat Wall Street estimates on the top and bottom line and raised its full-year guidance due to improvements in China and lower freight costs.

Shares of the company rose more than 12% in extended trading.

Here’s how the retailer performed in its fiscal first quarter compared with what Wall Street expected, based on a poll of analysts compiled by Refinitiv:

  • earnings per share: $2.28 vs $1.98 expected
  • Income: $2 billion vs. $1.93 billion expected

The company’s net income for the three-month period ended April 30 was $290.4 million, or $2.28 per share, compared with $190 million, or $1.48 per share, a year earlier.

Sales rose 24% to $2 billion, up from $1.61 billion a year earlier.

China revenue alone soared 79% from the year-ago period, when the country was still grappling with Covid restrictions and nearly one-third of Lululemon’s 71 China stores were temporarily closed.

Head of Finance Meghan said, “Our Q1 results were strong as guests responded well to our product offerings in all of our markets around the world. A meaningful acceleration in our China sales trend, combined with lower air freight costs, Contributed to our better than planned financial performance.” Frank said in a statement. “We are pleased with our momentum for the second quarter and full year as reflected in our revised outlook for fiscal 2013.”

According to Refinitiv, the retailer now expects full-year revenue of $9.44 billion to $9.51 billion, up from previous ranges of $9.31 billion and $9.41 billion, and will beat Wall Street’s estimate of $9.37 billion. It expects full-year earnings per share of $11.74 to $11.94, compared with a prior range of $11.50 to $11.72. It also topped analysts’ expectations, according to Refinitiv, which had called for $11.61 per share.

Lululemon expects second quarter sales to be between $2.14 billion and $2.17 billion, representing growth of approximately 15%. Lululemon expects diluted earnings per share in the range of $2.47 to $2.52 for the period. According to Refinitiv, second-quarter guidance was largely in line with Wall Street’s expectations.

Shares of Lululemon jumped in extended trading after a strong quarterly report.

The apparel retailer, which sells high-end yoga pants, shoes and other athletic apparel, saw sales rise 24% year-over-year, even as it reported strong comparisons to the year-ago period. , which came during an easier macroeconomic situation. background.

This time last year, Lululemon had raised its prices, but shoppers were still flocking to its stores and filling up their digital carts. And they weren’t yet feeling the pressure of persistent inflation.

Total comparable sales, according to StreetAccount, which tracks digital revenue and sales at stores open for at least 12 months, rose 14% in the quarter, well below estimates of 15.1%.

While comparable store sales outperformed expectations in the most recent quarter — jumping 13% compared to StreetAccount’s estimate of 8.3% growth — direct-to-consumer revenue fell short of estimates, compared to 22.3%. That was an increase of 16% from the prior-year period. Analysts were expecting a % jump, according to StreetAccount.

Shoppers are seen walking into Canadian sportswear clothing band, Lululemon store in Hong Kong.

While DTC revenue increased over the previous year, it constituted 42% of total sales, as against 45% in the year-ago period.

Gross margin increased 3.6 percentage points to 57.5% in the quarter, driven by a decrease in air freight expenses. According to StreetAccount, this was above analysts’ expectation of 56.7%.

By category, women’s sales increased 22%, men’s sales increased 17%, and accessories sales increased 67%.

Inventory, which has been an ongoing issue for Lululemon, rose 24% to $1.58 billion at the end of the quarter and is expected to rise 20% next quarter. During the earnings call, company executives stressed that its inventory is commensurate with sales growth and said they are “comfortable” with its position.

Still, he acknowledged that Lululemon has work to do.

“We will still have opportunities … to get our inventory [turnover rates] back to historical levels. “We’ve seen some material improvements in supply chain and lead times, but not a return to historical positions,” Frank said during the earnings call. So, it’s too early to say when we’ll get back to those levels, but that would be the goal in the long term.”

The company expects to open 50 net new company-operated stores in the financial year. Thirty to 35 of those will be in international markets, with the majority planned for China.

discretionary spending

While the company largely serves high-income consumers that have fared better against macroeconomic pressures, retailers across the industry have cited discretionary spending and a reduction in high-ticket items.

During Nordstrom’s earnings call Wednesday evening, executives said the high-end customer is “pretty resilient,” but they’ve also become more cautious.

Meanwhile, Lululemon said it hasn’t seen any change in its customers’ shopping habits.

CEO Calvin McDonald said, “In terms of our guest metrics, they remain very strong. We haven’t seen any change in the behavior of our group in terms of frequency of purchase or engagement.” “Additionally, in the first quarter, we saw a 22% increase in transactions by existing guests and a 28% increase in our transactions by new guests.”

During the current earnings season, some analysts have cautioned that retailers of soft goods, or those that sell items such as clothing and footwear, could see declining margins due to an increase in promotional activity and an overall decline across sectors. .

So far the results on that front have been mixed.

Many retailers have benefited from the slower movement of the supply chain, such as reduced freight costs, which has increased their margins. But for some, the increase in promotions and shrinking among other constraints wiped out a lot of their savings.

it was true foot Locker but others in the category, including Difference  And urban Outfitters were able to hold the line on promotion and saw gains in their margins.

connected fitness

Last month, sources reported that Lululemon is looking to sell Mirror, its home fitness business, and has approached competitor Hydro as a potential buyer.

The company announced that it would acquire Mirror for $500 million in June 2020, at the peak of the at-home fitness bonus, on the condition that people continue to exercise at home, even after the COVID pandemic restrictions end and Even after gyms reopen.

The segment has since been rebranded as Lululemon Studios, but its balance sheet is suffering.

During its last fiscal quarter, the company said it took $443 million in impairment charges related to Mirror and told investors that hardware sales were lower than expected.

Lululemon acknowledged that the home fitness market is under pressure.

Similar to Peloton, Lululemon has started to move this segment away from being just hardware-centric.

Most recently, the company launched a new digital app for Lululemon Studios, which costs the same as Peloton’s introductory membership of $12.99 per month and gives customers access to its fitness classes without needing to buy its hardware.

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