Consumers are still loving their Lululemon looks, with the athletic apparel company posting financial results well ahead of forecasts. The Vancouver-based company also revealed a 2023 new product pipeline encouraging observers, even as other apparel brands are stumbling amid slowed consumer spending.
For the fourth quarter, Lululemon's sales jumped 30% to $2.8 billion. On a constant-currency basis, they rose 33%. In North America, revenues gained 29%, compared to 35% internationally.
Direct-to-consumer sales had an excellent quarter, gaining 37%. Those transactions now account for more than half -- 52% -- of the company's sales.
Income from operations dropped 47%, to $314.4 million. The company is still working through charges related to its Mirror connected fitness division, including $442.7 million during the fourth quarter.
Both sales and profits came in better than investors expected, as did its forecast for the months ahead. It now expects a revenue increase of 18% in the coming quarter and gains of about 15% for the full fiscal year, from $9.3 billion to $9.4 billion.
"Our ability to exceed our annual revenue target in a dynamic operating environment is a testament to the enduring strength of the Lululemon brand," said Meghan Frank, chief financial officer, in the announcement. "We remain optimistic regarding our ability to deliver sustained growth and long-term value for all our stakeholders."
"Brand momentum remains very healthy," writes Mark Altschwager, an analyst who follows Lululemon for Baird, in his note on the results. "Once again, sales strength was broad-based across product classifications, sales channels, and regions, while share gains picked up steam." That includes an increase of 2.3 percentage points in U.S. market share.
Upcoming product launches, including a road-to-trail running shoe, also bode well for the company.
The new two-tier membership program for Lululemon Studio, formerly Mirror, will expand the reach of the program, launched last fall.
Members will be able to access digital fitness content via a new app, set to launch this summer, for a lower monthly fee.
The company says the evolution of this strategy, away from a hardware-only offer, "will create efficiencies and enable more guests to experience the full range of digital fitness content, while also building a larger community of guests with a deeper connection to Lululemon."
Although the company isn't immune to a slowdown in consumer spending, it's protected by an affluent customer base, steady innovation and a persistent demand for athleisure and wellness brands, says Altschwager. "We believe Lululemon is well positioned to sustain healthy sales and earnings growth in the current environment.”