Lululemon Athletica keeps defying the retail odds, posting an 18% sales gain and raising forecasts in a season where most retailers report downbeat results.
Comparable sales for the Canadian company rose 11%, while revenue climbed 18% to $2.2 billion, compared to $1.87 billion in the second quarter of last year. That includes an 11% gain in North America and a jump of 52% internationally, with robust results in China. Net income climbed to $341.6 million, compared with $289.5 million in the year-ago period.
Both sales and profits topped expectations. And the company’s decision to raise its forecast also came as a pleasant surprise. Lululemon anticipates a sales gain of between 17% and 18% next quarter and an increase of between 17% and 18% for the full year. That would take annual revenues to $9.57 billion, well on the way to reaching its target of $12.5 billion in annual sales by 2026.
Lululemon, with 672 stores, attributed the strong performance to improvements in international business and an expanding product portfolio. That includes the move into running shoes and the ongoing success of its men’s line.
Observers remarked on Lululemon’s latest star turn, adding to its persistent ability to shine, even when its core audience is cutting back spending in other realms.
“We come away from the second-quarter results more confident in the abilities of senior leadership to manage well ongoing macro and sector challenges, all the while continuing to expand the reach of the brand,” writes Brian Nagel, an analyst who follows Lululemon for Oppenheimer.
The company is “further developing an already enviable, world-class omnichannel infrastructure.”
He also notes consumers’ strong response to Lulu’s back-to-school and early fall product innovations. Those include extensive new offers to its burgeoning menswear line.
Neil Saunders, managing director of GlobalData, is also impressed with Lululemon’s results. “While much of the retail market is in the doldrums, Lululemon continues to benefit from … customers who are more insulated from economic pressures, and addressing a market which is growing and retains the interest of consumers.”
Yet others competing in the same space, including Under Armour, are limping along. Saunders writes that the company’s ongoing focus on product innovation is responsible.
“New technical benefits create interest among consumers and allow them to justify buying something new because they see it as an upgrade,” a significant benefit in mature categories like leggings. “Design also plays a role, with interesting new colorways and silhouettes helping to create interest.”