Lululemon finishes year strong but warns of slowing U.S. sales
Lululemon Athletica Inc. maintained its momentum in the fourth-quarter reporting earnings and revenue that beat estimates, helped by soaring international sales.
The athletic apparel struck a cautious note during its earnings call, with CEO Calvin McDonald telling analysts that “there has been a shift in the U.S. consumer behavior of late and we’re navigating what has been a slower start to the year in this market.”
McDonald said that both traffic and conversions are down in the U.S., which he attributed partially to a lack of products in sizes zero to four and not enough colorful items.
“Outside the U.S., our business remains strong in all our international markets,” he said.
McDonald noted that Lululemon stores “remain among the most productive in the industry,” with U.S. sales per square foot above its overall average of $1,600.
Lululemon’s net revenue rose 16% to $3.21 billion, ahead of estimates, in the quarter ended Jan. 28. Sales rose 9% in the Americas, compared to an increase of 29% in the year-ago period. International net revenue increased 54%.
Comparable sales rose 12%. Americas comparable sales increased 7%. International comparable sales increased 43%.
The company’s net income totaled $669.5 million, or $5.29 per share, compared with $119.8 million, or $0.94 per share in the year-ago quarter. Analysts had expected earnings of $5 a share.
For 2023, net revenue increased 19% to $9.6 billion. Americas net revenue increased 12%. International net revenue increased 54%. Comparable sales increased 13%.
“During the fourth quarter, we saw continued momentum across our channels, geographies, and merchandise categories, driven by our teams around the world,” McDonald said in the earnings release. “As we step into 2024, we are focused on the significant opportunities ahead for Lululemon as we navigate the dynamic retail environment and deliver for guests through innovative new products and brand activations."
In his statement, McDonald said that the company continues to be “ahead” of its Power of Three ×2 strategy, which calls for a doubling of the business from 2021 net revenue of $6.25 billion to $12.5 billion by 2026. The plan includes doubling the brand’s men’s business.
In February, Lululemon said it was growing its footwear offerings with the debut of its first casual sneaker and two new running styles. The sneaker and new running shoes will be available in women’s as well as men’s styles, marking the launch of the brand’s first-ever men’s footwear line.
For fiscal 2024, the retailer expects sales to be between $10.7 billion and $10.8 billion. Analysts had forecast sales of $10.9 billion. It expects earnings per share will be between $14.00 and $14.20 for the year, compared to estimates of $14.13.
For the first quarter, the company expects net revenue to be in the range of $2.18 billion to $2.2 billion. Analysts are expecting $2.26 billion.
Lululemon opened 56 net new company-operated stores during the quarter, ending with 711 stores.