Lululemon shares surge on earnings beat, hiked outlook as shoppers spend on workout apparel

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Lululemon shares surged more than 13% in extended trading Wednesday after the athletic apparel maker reported fiscal second-quarter profit and revenue that topped analysts’ expectations.

Consumers are shopping Lululemon stores and the company’s website for its sports bras, jogger pants and leggings for their stay-at-home wardrobes. But many are also seeking out stretchy pants and comfortable clothing as they return to the office. The shift toward so-called athleisure is benefiting retailers such as Lululemon and Nike.

Lululemon offered a better-than-expected outlook for the third quarter and for fiscal 2021, expecting momentum to build. Based on its current forecast, Lululemon is now on track to surpass its 2023 revenue target by the end of this year, two years ahead of schedule.

Chief Executive Officer Calvin McDonald told analysts during an earnings conference call that the company will issue fresh financial targets after the holiday season.

Here’s how the company did compared with what Wall Street was expecting, using a Refinitiv survey of analysts:

  • Earnings per share: $1.65 adjusted vs. $1.19 expected
  • Revenue: $1.45 billion vs. $1.34 billion expected

Net income for the three-month period ended Aug. 30 rose to $208.1 million, or $1.59 per share. That’s up from $86.8 million, or 66 cents per share, a year earlier. Excluding one-time items, the company earned $1.65 per share. That’s better than the $1.19 that analysts polled by Refinitiv had been looking for.

Revenue rose 61% to $1.45 billon from $902.9 million in the year-ago period. That was ahead of expectations for $1.34 billion.

Sales in North America climbed 63% year over year and were up 49% internationally.

“Our performance in Q2 was driven by a strong response to our product offering, improving productivity in our stores, and sustained strength in e-commerce,” Chief Financial Officer Meghan Frank said in a statement.

The company, which also owns the at-home fitness device Mirror, said it remains on track to double its men’s business this year and to quadruple its international business by 2023.

On a two-year basis, Lululemon reported its women’s business grew 26% while men’s was up 31%.

It didn’t, however, break out sales of Mirror products during the latest quarter. It currently has mini Mirror shops in 150 Lululemon stores and will ramp that up to 200 before the holidays.

Similar to Peloton, Lululemon said it is now having to spend more money on marketing for Mirror as competition heats up in the connected fitness product category.

Lululemon expects fiscal third-quarter revenue in a range of $1.4 billion to $1.43 billion, with adjusted earnings per share of between $1.33 and $1.38. Analysts had been looking for Lululemon to earn $1.32 per share on revenue of $1.32 billion, according to Refinitiv.

For the fiscal year, the company expects revenue to range between $6.19 billion and $6.26 billion. Adjusted earnings per share are expected to be between $7.38 and $7.48. Analysts had been looking for Lululemon to earn $6.91 per share on sales of $5.94 billion.

Lululemon said its outlook does not take into consideration any future impacts from Covid. The company also acknowledged it still faces supply chain constraints. Backlogged ports and a shortage of cargo containers and truck drivers, among other challenges, have left gaps in retail inventories throughout the industry.

Lululemon said it is prioritizing manufacturing key fall styles and is using more air freight to try to ease pressure and bottlenecks. It expects temporarily shuttered factories in southern Vietnam to begin to reopen later this month, which should also help its situation.

As of Wednesday’s market close, Lululemon shares are up about 9% year to date.

Recently, the stock has traded down from an all-time high of $417.85, which it hit late last month. Lululemon’s market cap is nearly $50 billion.

Find the full earnings press release from Lululemon here.

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