Lululemon Athletic Inc. saw its shares rise nearly 9 percent yesterday after the company announced strong third-quarter financial performance on its way, helped by strong international expansion to offset sluggish sales in the company’s largest home market of Canada. Lululemon also outperformed the Street, beating expectations for earnings of $2.87 per share versus analyst estimates of $2.69. In the period under review, revenue improved to $2.40 billion by 9 percent in one year. That also has a best estimate of $2.36 billion. With growth in the Americas, Lululemon saw a massive 25% increase in exports, especially to China, which helped propel the company forward.
For the holiday shopping quarter, the company forecast between $3.48 billion and $3.51 billion in revenue, indicating growth of 8% to 10%, in line with analyst expectations. The company’s earnings per share is expected to range from $5.56 to $5.64, just above the consensus estimate of $5.59. The short holiday shopping season will be carefully planned, especially given the uncertain economic climate, said Meghan Frank, Lululemon’s chief financial officer.
Despite these encouraging findings, Lululemon’s expansion in the US slowed, with comparable sales in the region falling 2%. However, it remains optimistic about its future prospects, citing positive changes in its product mix and a return to a strong position in the US following earlier missteps, including failed product launches and a lack of supply of key styles. CEO Calvin McDonald said the strategy is on track. Also included is a new organizational structure implemented after chief product officer Sun Choe left the company in May.
The company also faces increasing competition from new entrants such as Vuori and Alo Yoga challenging its leadership in the athletics market. To address this, Lululemon has continued to invest in new products and expand its international presence, which has significantly increased the company’s revenue. Net income for the quarter exceeded expectations at 58.5%, an increase of 1.5 percentage points, indicating that the company’s performance is strong.
Outside of the earnings report, Lululemon publicly disclosed a US$1 billion increase in the current stock buyback program, demonstrating a commitment to shareholder value. Its ability to meet challenges while still capitalizing on international growth put it in a healthy position to close the financial year.
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