Lulu Lemon Selling Yoga Pants On The Line Is Expected To Stop Loss?

Lulu lemon released 2021 fiscal year first quarter financial report. According to the earnings report, Lulu lemon performance in this quarter is lower than market expectations, net profit year-on-year decline is more obvious. Affected by this news, Lulu lemon closed its stock price at 308.12 dollars as of June 11th, down 4.68%.

Affected by the epidemic in the first quarter, the global garment industry has been greatly affected. A large number of offline stores have been forced to shut down, brand owners are overstock, and downstream apparel industry chains have been shut down. What is the ability of the yoga clothing brand Lulu lemon to resist risks? During the epidemic period, Lulu lemon electricity supplier channel showed a strong rise, in the post epidemic era, which will become the thrust of its performance recovery?

Revenue fell 17% year-on-year, net profit fell 70.36%

The net income of Lulu lemon in the first quarter decreased 17% to 652 million US dollars, down from market expectations of $44 million 20 thousand, and net profit of $28 million 632 thousand, compared with $96 million 603 thousand last year, and diluted earnings per share of $0.22, compared with $0.74 last year.

Due to the fact that revenue and net profit were not optimistic, the Lulu lemon trading before the article was $291.55, which fell 5.38% before the market, and the market value was $38 billion 458 million. From the perspective of capital market sentiment, Lulu lemon's performance is not very satisfactory.

In the first quarter, the Company repurchased 400 thousand shares of common stock at an average price of $172.68 per share. As of June 10, 2020, 295 of the company's stores had opened. In the first quarter of May 3rd, the company had 489 stores.

At the telephone conference after the earnings report, Lululemon executives revealed that the company's performance was expected to slow down, and that the quarterly revenue would drop by a high figure. Earnings per share would not increase until the fourth quarter.

For the next quarter earnings guidelines, Lulu lemon said that due to the global health impact of public health events, the company will not provide detailed financial guidance in fiscal year 2020.

From the earnings report, the clothing industry has been affected by the epidemic in the first quarter. It is clear that Lulu's performance is also under pressure. Looking closely at this earnings report, the US stock research society will explore the causes of Lulu lemon's performance from the following points.

Revenue decline, net profit shrunk, Lulu lemon risk resilience is weak.

Affected by the epidemic in the first quarter, consumption demand in the global market is flagging, and the situation of garment enterprises is even more optimistic. GAP has lost $1 billion since February, and 80 thousand employees have been suspended from their pay. Esprit announced the closure of a total of 56 stores in Asia except the mainland, while Anta sports retail sales showed a negative 20%-25% growth over the same period last year.

From the earnings report released by apparel peers, the decline in net revenue from revenue decline is a common problem faced by these garment listed companies. What are the factors that affect the performance of Lulu lemon as a sports giant whose main product is Yoga wear?

First, many offline stores in the world are forced to close, and the revenue of offline stores is shrunk.

In the source of Lulu lemon's income, the revenue from offline stores is not low. Like most retailers, Lulu's revenue mainly comes from offline stores and online channels. According to previous earnings data, the next line store contributed nearly 63% of revenue in 2019. Obviously, Lulu lemon is still more dependent on the revenue of offline stores. This year's revenue fell year by year, and the closure of stores under the line is an important reason.

Due to the impact of the epidemic, it also brings a lot of business pressure to Lulu lemon. On the one hand, many stores in the world were forced to close. By the end of January, Lulu lemon was closed in the Chinese market, and stores in most parts of North America and Europe had been suspended since March 16th. New Zealand stores also closed from April, and stores in Australia and parts of Asia shortened business hours.

Due to the outbreak of the epidemic in many countries around the world, Lulu lemon can only choose to close shop, and now the offline stores in Europe and the United States have not resumed business. According to the data disclosed by Lulu lemon, it will need to wait until June when its offline stores in the world are restored to business. We can see that the two quarter's revenue will still face some growth pressure.

On the other hand, in addition to the decline in revenue, the closing of stores has also increased the cost of Lulu lemons in manpower. As Lulu lemon must perform mandatory capital expenditures such as human capital and rent rentals, Lulu lemon executives also choose to reduce wages to reduce costs, but from the earnings report, Lulu lemon revenue decline may be faster than capital expenditure reduction.

Two, shipments "epidemic" is facing seasonal shortfalls, inventory reduction and purchase volume are affected by earnings.

In this quarter, Lulu lemon net profit performance has shrunk significantly, compared with the net profit of the last quarter, the performance of the ring is not satisfactory, the net profit of the fourth quarter is 298 million dollars, up 36% over the same period. Previously, Lulu lemon's net profit was able to maintain a good scale, mainly because Lulu lemon Yoga suit went to the high-end market, and the price was higher than Nike's. Why did net profit decrease more clearly in the first quarter? In the view of the US stock research society, it is mainly affected by two aspects.

On the one hand, due to public health incidents, the company's shipments are facing a seasonal shortfall, Lulu lemon is forced to reduce production shipments. This change will reflect the impact of the company on seasonal fashion trends, and management has rapidly reduced the amount of inventory purchases. Affected by the epidemic, clothing production downstream production has also faced a shutdown, which, to a certain extent, also causes short-term production capacity to be dragged down. In particular, the seasonal transition is obvious, which is short of product gap in spring and summer. This also affects the sales volume of Lulu lemon.

On the other hand, due to the impact of the epidemic, Lulu lemon will inevitably face the problem of backlog. In the earnings call conference, Calvin McDonald said that the main reason for the stock jump was that Lululemon was not willing to discount. In addition, 40% of the inventory was made up of core products, which sold for a long time and had large demand, not seasonal goods. Because of the backlog of so many goods from the major sports companies, you will not promote sales, and people will also promote sales. If we do market promotion at the same time, this market competition can be imagined fiercely. To a certain extent, it also affects the performance of Lulu lemon.

In the first quarter, the Canadian Yoga brand Lulu lemon has surged by 130% since its rebound in March, and is hitting a record high every day. It is clear that Lulu lemon also passed a dark to the road, stock prices continued to rise, indicating that many investors value their follow-up performance. Behind investors' optimism, what signs did Lulu lemon reveal in its earnings report this quarter?

Line to line transfer of electricity supplier channels, Lulu lemon, through digital opportunities to try to save themselves, although the epidemic brings a great impact on the global garment industry, but in this round of tests, we also see some outbreak points, among which the channel of e-commerce has become an important way for many sports brands to stimulate sales growth. According to the earnings reports released by many sports brands, the electricity supplier obviously became a bright spot in their earnings report. Puma's e-commerce business grew by about 40% in the first quarter and is still growing rapidly. Similarly, Lulu lemon's performance on the electricity supplier has become a positive point.

According to Lulu lemon CEO Calvin McDonald, online sales in April increased by 125%, and the current growth momentum is continuing. During the epidemic period, the demand of home users for home exercise increased greatly, and the demand for yoga clothing increased. On the basis of the rising user demand, it also promoted the rise of Lulu lemon's products in the electricity supplier channel. Obviously, this is a very important development opportunity for Lulu lemon.

At present, Lulu lemon is still open to stores in the Chinese market, and stores in European and American countries are still affected by the epidemic. Therefore, in this context, Lulu lemon executives also revealed that the company will further exert its power in the channel of e-commerce. Taking the Chinese market as an example, it will become one of the most important incremental markets for Lulu lemon. Last year, Lulu lemon's electricity revenue in the Chinese market increased by 70%.

At the competitive level, the sports giants Nike and Adidas are in the main market force, especially the Chinese market has become an important market for the growth of these sports giants. In the 2020 quarter of fiscal year Q3, Nike achieved two digit growth in 21 consecutive quarters in the Greater China region, and this is not only a business opportunity brought by "fried shoes". Developing women sports products, multi line operation on channel, excellent brand operation, and training sports fans economy are the key to their fame and gain. Last year, Puma's global sales exceeded 5 billion euros for the first time, especially in the Asia Pacific region. The Greater China region and India were the main driving force.

In order to seize the Chinese market, from the current major sports brand discount strength, the price war has started. At the time of 618, Nike (Nike), Puma, Lulu lemon (lululemon), Andemar (Under Armour), Anta, Lining and other sports brands launched various promotional activities on Taobao platform. It is precisely because competitors are pushing the electricity supplier channels, which is not too small for Lulu lemon growth pressure, especially in terms of price, Nike relatively Lulu lemon is more affordable.

At the end of the product, on the SKU, the coincidence degree of lululemon and Nike is getting higher and higher. As the biggest black horse in sports industry, Lulu lemon also causes Nike's vigilance. Nike is stepping up the layout of the Yoga market. After the first release of yoga products, Nike launched the Yoga series Infinalon in January this year. For Lulu lemon, it is particularly important to take different development routes according to local conditions in the Chinese market.

epilogue

The stock of Lulu lemon has risen more than 37% since May. From the perspective of stock price performance, many investors are optimistic about the performance of Lulu lemon. Of the 33 analysts covering the company, 21 hold "buy" ratings, while 12 analysts maintain a "neutral" rating with a target price of $235.67, a 23.66% drop from the current share price. According to analysts' ratings, they seem to be worried about the performance of Lulu lemon. For Lulu lemon, how to restore the double growth of revenue and net profit as soon as possible may be the key to maintain the rising share price.