With financial observers frantically searching for companies they believe can weather the COVID-19 pandemic, Lululemon continues to attract investor love.
Besides posting strong sales and earnings for the quarter, the company is beefing up its workout-at-home video offerings. With all but one of its stores in China reopened for business, it’s also providing a peek at what business may look like when the U.S. emerges from the brunt of virus-related closures.
The Vancouver, Canada-based company says fourth-quarter revenues, which ended Feb. 2, rose 20% to $1.4 billion, and that comparable sales also increased 20%. In stores, comparable store sales gained 9%, while direct-to-consumer revenue jumped 41%. And gross profit climbed 21% to $810.8 million.
In February, the athleisure brand shut down all its stores in China. In March, it temporarily closed all retail locations in North America, Europe, Malaysia and New Zealand, as well as its distribution center.
And while the company declined to provide guidance for what to expect in the months ahead -- as many public companies have chosen to do -- observers are encouraged by its resilience in reopened stores in China.
Because of its unique positioning in the premium athleisure segment, it has “the potential to manage through the current headwind well and emerge from the coronavirus crisis an even stronger brand,” writes Brian Nagel, who follows Lululemon for Oppenheimer & Co.
“Management indicates that, now that the company’s stores in China have reopened, sales trends in these units continue to rebound steadily and are pushing back toward pre-crisis levels,” he says in his recent note on Lululemon. “And even with stores in the U.S. and other markets now closed, online sales in these regions are tracking well. And in some instances they are flexing stronger than normal.”
He says the company’s shift in marketing to its digital channel and efforts to connect with home exercisers may also help the company. And unlike many retailers, much of its seasonal inventory may carry over, “limiting the risks of significant inventory write-downs or promotions.”
Others aren’t quite so ready to be optimistic. “We believe consumers will continue to view Lululemon’s products as best in class,” writes analyst Paul Trussell, who follows the company for Deutsche Bank. “But it is too early, in our opinion, to determine if the company will resume the same rate of growth post-virus, in a weaker economic backdrop.”