On June 5, local time, lululemon athletica Inc., a Canadian sports and yoga apparel supplier headquartered in Vancouver, announced its financial results for the first quarter of fiscal year 2024, ending on April 28, 2024. The company reported a 10% year-over-year increase in net revenue to $2.2 billion (11% increase on a constant dollar basis), surpassing expectations. Notably, net revenue in the Chinese Mainland market grew by 45% year-over-year (52% on a constant dollar basis).
Additionally, during the first quarter of fiscal year 2024, lululemon repurchased 800,000 shares of common stock at a cost of $296.9 million. On May 29, the Board of Directors approved a new $1 billion stock repurchase program. Including this new authorization, the value of lululemon’s stock repurchase program stood at approximately $1.7 billion as of June 5, 2024.
Driven by these strong results, lululemon‘s stock price rose 9.7% in after-hours trading, reaching $328.23 per share as of 8:00 PM, with the latest market capitalization standing at $42.4 billion.
In the first quarter, lululemon’s gross profit increased by 11% year-over-year to $1.3 billion, with a 20 basis point improvement in gross margin to 57.7%. Operating profit rose by 8% year-over-year to $432.6 million, although the operating margin decreased by 50 basis points to 19.6%. Diluted earnings per share were $2.54, compared to $2.28 in the same period last year. As of the end of the first quarter of fiscal 2024, lululemon operated 711 self-owned stores.
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Regarding the first quarter performance, lululemon CEO Calvin McDonald stated, “In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world. Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment. Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver for our guests in 2024 and beyond.”
Specifically addressing the Chinese Mainland market, Calvin McDonald mentioned in the earnings call, “This quarter, we performed exceptionally well in the Chinese Mainland market. We are still in the early stages of development in this market, with significant growth opportunities in store expansion, digital business, and brand awareness. During my visit to the Chinese Mainland last week, I witnessed firsthand the strong resonance our brand has with local customers, and this is also true in other global markets, which is very exciting for us.”
Chief Financial Officer Meghan Frank added, “Our first-quarter performance exceeded expectations due to our flexible operations and continued strategic investments in the business. For the remainder of the year, we remain focused on leveraging our strengths and differentiated model to advance our Power of Three ×2 growth strategy and enhance performance. We are energized by the opportunities ahead and believe we have the capability to drive sustainable long-term growth.”
*Note: The Power of Three ×2 plan, announced in April 2022, is a five-year growth strategy aiming to double lululemon’s net revenue from $6.25 billion in fiscal year 2021 to $12.5 billion by 2026. The key pillars of this plan are product innovation, guest experience, and market expansion, including doubling men’s and direct-to-consumer revenue from the 2021 baseline and quadrupling international net revenue. Lululemon has previously stated that China will become its second-largest global market.
The popular Pace Breaker and Zeroed In shorts series for men by lululemon.
Discussing product innovation, Calvin McDonald reflected and looked ahead during the earnings call, “In the first quarter, we successfully hosted a media launch in New York for our spring-summer 2024 footwear collection, including the cityverse athleisure shoes and beyondfeel running shoes. The new footwear collection performed exceptionally well after launch, especially among male customers, exceeding expectations. Subsequently, we hosted our brand’s first women’s ultramarathon project, FURTHER, in California, unveiling innovative products designed for female athletes.”
On brand building, Calvin McDonald shared in the call that the brand will continue to enhance awareness and attract more customers through community activities. Notably, in celebration of the 20th anniversary of the F1 Chinese Grand Prix, lululemon teamed up with China’s first F1 driver and brand ambassador Zhou Guanyu to launch the “Step Into Your Pace” campaign, inspired by the cityverse shoes, and held a special exhibition in Shanghai to support Zhou’s first home race. In the upcoming second quarter, lululemon will host the “Summer Challenge” in the Chinese Mainland for the fourth consecutive year.
In April, lululemon teamed up with China’s first F1 driver and brand ambassador Zhou Guanyu to launch the “Step Into Your Pace” campaign and held a special exhibition for his home race debut.
Looking forward to fiscal year 2024, Calvin McDonald further shared that the brand will continue to maintain strong momentum in product innovation, introducing a series of significant product innovations in the near and second half of the year. “For women’s wear, we plan to launch more anticipated legging products. For men’s wear, we will continue to expand the popular Pace Breaker and Zeroed In shorts series. Notably, our new ShowZeroTM technology will be applied to the design of the recently launched men’s casual shirts, featuring innovative fabric structures that maintain comfort while minimizing sweat marks, suitable for golf, commuting, and other scenarios.”
As a result, lululemon expects full-year net revenue to be between $10.7 billion and $10.8 billion, representing an 11% to 12% increase year-over-year (excluding the 53rd week of fiscal 2024, net revenue is expected to grow 10% to 11%). The company also maintains its forecast for a full-year operating margin of approximately 23.3%. Additionally, lululemon currently projects full-year diluted earnings per share to be between $14.27 and $14.47.
For the second quarter of fiscal year 2024, lululemon expects net revenue to be between $2.4 billion and $2.42 billion, representing a year-over-year increase of 9% to 10%. Diluted earnings per share for the quarter are expected to be between $2.92 and $2.97. These forecasts do not reflect potential future stock repurchases by the company.
｜Source: lululemon official website, official earnings report, and official press release
｜Image Credit: lululemon official website and official press release
｜Editor: Wang Jiaqi
