Lululemon Grew 16% In The First Quarter, Raising Annual Profit Outlook

Lululemon Athletica Inc. (NASDAQ:LULU), a North American high-end yoga clothing retailer, has announced a year-round increase in its revenue and earnings outlook in the 16% quarter of last year after a strong sales growth of about 7%, stimulating stock prices to rise to a record high of 7% to 182.89 dollars in the early morning.

In the first quarter of May 5th, the comparable sales growth of Lululemon Athletica Inc. was much faster than that of Consensus Metrix's composite forecast of 11.4%, of which the same store sales increased by 8% year-on-year after the exchange rate was cut off, and directly increased to 35% in terms of consumer income. Last year, the number of entity stores and number businesses has increased by 6% and 60% respectively.

Total revenue rose 20.4% to $782 million 300 thousand over the same period, better than the $755 million 300 thousand expected by the market and 22% after the exchange rate. As of the end of the season, the group has 455 direct outlets worldwide, and the proportion of direct consumer (digital) business has increased to 26.8% from 24.3% in the same period last year.

In the latest five year plan, management has set a goal of doubling the size of e-commerce and men's clothing business before 2023, and international revenue has increased by three times. The overall strategy of the plan is to take advantage of the above three areas of growth and create new growth points by expanding new products and maintain the annual growth rate of 11%-13% by 2023.

New products include personal care products such as incense agent, dry cleaning, hair spray, moisturizing cream and lip balm, which are listed next week. Analysts believe that these products are close to the daily needs of Lululemon core customers and complement each other with clothing accessories. In addition, the 25 thousand square feet Lululemon new concept flagship store with the experience of meditation room, health food and juice bar will soon be in the 7 moon phase of Chicago. Using new store mode, membership plan and offline activities to enhance healthy lifestyle, customer experience is also an important strategy for the new five year plan.

At the analysts' conference call, Stuart Haselden, chief operating officer, pointed out that China's business grew by nearly 70% in the first quarter. During the period, they not only moved to three new cities, such as Xi'an and Chongqing, but also upgraded the Chinese brand official website of the electric business function, and the number of sales doubled under the support of Tmall and WeChat. The Tmall super brand day event in April was a great success.

In response to analysts' questions, Stuart Haselden pointed out that compared with the North American market, Lululemon Athletica Inc. focuses more on digital business in China. The group is also increasing investment in the brand official website and WeChat mall, promoting the balance between the two channels and Tmall flagship stores. Stuart Haselden emphasizes that entity expansion helps to enhance brand awareness in China, and this year there are 10-15 new stores planned in this area.

Asia Pacific and European markets grew by about 40% in the first quarter and 18% in North America. Last year, Calvin McDonald, chief executive of Sephora USA Inc., said that the momentum of the local market remained strong, which was reflected in the high digit growth of the physical passenger flow, not only the number of new customers continued to rise, but also the consumption of repeat customers.

In the first quarter, Lululemon Athletica Inc. achieved a net profit of 96 million 600 thousand US dollars, an increase of 28.5% over the same period last year of 75 million 150 thousand US dollars, and EPS rose from 0.55 to 0.74 US dollars, which was better than the 0.71 US dollars expected by the market. Gross margin increased by 80 basis points to 53.9%, and chief financial officer PJ Guido revealed at a conference call that the decrease in discount rate contributed to the improvement of gross margin.

The group raised its annual revenue guidelines from 37-37.4 billion to 37.3-37.7 billion, and EPS was also expected to increase from 4.48-4.55 to 4.51-4.58 dollars.

However, the median income and EPS outlook in the two quarter are not as good as market expectations. PJ Guido explained to analysts that although the proportion of finished products imported from China by Lululemon Athletica Inc. was only 6% from that of China, the proportion of products in listing three was only 1%, but they expected that Asian ports and routes might be congested due to the export of Chinese products before the tariff came into effect. Therefore, plans have been made to increase air spanportation to ensure product supply, at the expense of a 20-25 basis point gross profit margin for the whole year and EPS loss of 0.04-0.05 dollars.

The historical high of Lululemon Athletica Inc. (NASDAQ:LULU) has increased to 50.4% since 2019. Of the 35 analysts covered by Bloomberg, 60% or 21 of them recommended buying the stock, and only one person suggested selling it, with an average target price of $184.77.

Instinet Equity Research analyst Simeon Siegel praised Lululemon Athletica Inc. for "continuing to show the strongest retail performance". Credit Suisse Group AG Credit Suisse analysts believe that the group's menswear and international strategy and the membership plan launched at the end of last year can bring positive long-term prospects. Author: Lin Biying