Lululemon’s Global Expansion Pays Off, Despite US Slowdown
The athletic apparel retailer Lululemon has reported a 9% increase in sales year over year, driven by significant growth abroad. While the company’s US growth continues to slow, its international sales have surged, leading to a strong third-quarter performance.
A Strong Start to the Holiday Season
Lululemon’s CEO, Calvin McDonald, expressed cautious optimism about the company’s fourth-quarter outlook, citing the shorter holiday shopping season. However, the company’s net income for the three-month period that ended October 27 was $352 million, or $2.87 per share, beating Wall Street’s expectations.
Global Sales Soar
Lululemon’s international sales grew by 25%, while its US sales slowed by 2%. The company’s revenue rose to $2.40 billion, up 9% from the previous year. For the holiday shopping quarter, Lululemon is expecting revenue to be between $3.48 billion and $3.51 billion, representing growth of 8% to 10% from the prior year.
Product Struggles Behind It
After a rough patch earlier this year, Lululemon appears to have turned a corner. The company’s product struggles, including a high-profile launch failure and missed sales opportunities, seem to be behind it. CEO Calvin McDonald credits the company’s agile teams for chasing into seasonal colors, prints, and patterns, contributing to a sequential improvement in newness within its assortment.
Efforts to Boost Profitability
Amid uncertain demand, Lululemon has focused on boosting profitability. During the third quarter, gross margin grew more than expected, increasing by 1.5 percentage points to 58.5%. The company has also turned to stock buybacks to keep investors happy, approving a $1 billion increase to its stock repurchase program this month.
A Brighter Outlook
Despite the challenges it has faced, Lululemon’s global expansion efforts are paying off. The company’s tightened revenue guidance and raised earnings per share outlook for the full year suggest a brighter future ahead. As CEO Calvin McDonald said, “We continue to see significant potential for growth in the U.S.”
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