Fitness apparel-maker, Lululemon Athletica, smashed results expectations and issued strong fiscal second quarter guidance. It also upped its full-year estimates thanks to growing momentum for its brand across all geographies in which it operates.
Revenue jumped 88.65% to $1.23 billion from a year earlier, when its stores were temporarily shut.
Lululemon said shopper traffic steadily rebounded to its stores which was evident in e-commerce sales only comprising 44.4% of total revenue versus 54% in the comparable period a year ago.
Gross profit increased 109% to $700.3 million and gross margins improved 580 basis points to an impressive 57.1%. This was thanks to cost management, favourable currency effects and a decrease in depreciation and occupancy costs.
Income from operations rose to $193.8 million, with operating margins rising to 15.8%. And net income grew to $145 million, or $1.11 per share, from $28.6 million, or 22 cents per share, a year earlier.
The Company ended the first quarter of 2021 with $1.2 billion in cash and cash equivalents and revolving credit facilities of $397.3 million.
Lululemon CEO Calvin McDonald said he expects its international business will grow to the same size as its North American operations in the near future. At the end of 2020, international sales represented only 14% of Lululemon’s total business.
For the year, it is forecasting adjusted earnings of $6.73 to $6.86 per share, on sales of $5.83 billion to $5.91 billion. Previously estimates for fiscal 2021 revenue were in a range of $5.55 billion to $5.65 billion.
The company also owns the home-fitness platform Mirror, a rival to Peloton (an exercise bike with an ipad strapped to it), which it expects will add between $250 million and $275 million in revenue this year. Lulu also recently launched a line of products that use lower-environmental-impact dyes, and is piloting a trade-in and resale program to boost sales to ESG conscious shoppers.
The Covid-19 pandemic has driven demand for athletics gear to wear around the house (and for the office), for time-conscious workout-ready employees. This trend hasn’t appeared to slow down and has benefited companies including Lululemon, Nike and Under Armour. Whilst Lululemon is a great company our preference remains Nike, which we hold in our segregated portfolios and in the Cratos BCI Global Equity Worldwide Flexible Fund.