Lululemon Puts Its Brand-Building Muscle Into Mirror

Lululemon, posting strong quarterly sales gains, says it is continuing to beef up brand efforts for Mirror, the at-home workout company it bought last year.

For the fourth quarter of its fiscal year, revenue advanced 24% to $1.7 billion -- better than forecast -- while comparable sales rose 21%. Internationally, sales jumped 47%, while direct-to-consumer sales soared 94% and now account for 52% of its total. Income from operations improved 10% to $457.9 million. And for the quarter ahead, it predicts sales in the range of $1.1 billion to $1.13 billion -- somewhat higher than observers expected.

But Lulu's onlookers are curious about more than numbers, wondering how -- and how fast -- it can move forward with Mirror. Lululemon bought the connected-fitness company last June for $500 million. And ongoing investments in the brand, including stepped-up marketing and more classes, weighed on overall results.



The company thinks those will pay off in meaningful growth, tapping trends that go beyond COVID-19. "We started the process to purchase Mirror before the global pandemic began," said CEO Calvin McDonald in a conference call for investors, as reported by The Motley Fool.

"I don't expect the pandemic tailwinds to disappear once mass vaccinations have occurred. Guests were seeking more convenient at-home options before COVID-19, and they will continue to seek these options post the pandemic," he said.

There are more than two Mirror users per household on average, accessing more than six types of each workout every month, McDonald reported. Investments include the addition of two more production studios and increasing the number of instructors.

"Mirror accounts for less than 5% of Lululemon's sales, but the firm anticipates revenue growth of 50% to 65% in 2021 on top of the product's $170 million in sales last year," writes David Swartz, who follows the company for Morningstar.

Lululemon is also emerging as one of the most solid bets as the world economy gets closer and closer to normal. "We believe the firm benefits from the athleisure fashion trend and will continue to achieve premium pricing due to the brand’s popularity and the styling and quality of its products," writes Swartz.

Brian Nagel, who follows the stock for Oppenheimer, thinks that among large consumer companies, Lululemon is "one of the most compelling growth stories and an attractive re-opening play," he writes in his report on its earnings. "In our view, a still small global footprint, superior product innovation and an overall shift to athleisure should support continued outsized top-and bottom-line expansion for the foreseeable future."

But Lululemon did toss out an important caveat. Most of its stores are now open. But it said "further resurgences in COVID-19, including from variants, could cause additional restrictions, including temporarily closing all or some of our retail locations again, result[ing] in lower consumer demand, and cause disruption in our supply chain."

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