Lululemon Sees Sales Jump 24%, Fueled By China Growth
For the full year, Lululemon expects net revenue to be in the range of $9.4-$9.5 billion, representing 17% growth
Lululemon is celebrating its 25th anniversary this year and has kicked things off with strong sales growth in Q1 of 2023, reporting net revenue of $2 billion, a 24% increase compared to the same period last year.
The athleisure brand’s gross profit increased 32% to $1.2 billion for the quarter.
Shares of Lululemon spiked over 12% Thursday in response to the earnings report.
Looking ahead to the second quarter, Lululemon expects net revenue to be between $2.14-$2.17 billion, representing growth of approximately 15%. For 2023, Lululemon expects net revenue to be in the range of $9.4-$9.5 billion, representing growth of approximately 17%.
“Our Q1 results were strong as guests responded well to our product offering in all our markets across the globe. A meaningful acceleration in our China sales trend, coupled with lower air freight, contributed to our better-than-planned financial performance,” said Lululemon CFO Meghan Frank.
Here’s a look at some key highlights from Lululemon’s June 1 earnings call:
Lululemon’s new Studio App
Lululemon has debuted a new $12.99-a-month digital app, allowing consumers to experience the brand’s fitness content without needing to purchase hardware, in a move that it says will expand its TAM.
Lululemon acquired Mirror, a connected fitness device, for $500 million in 2020, but the deal hasn’t gone according to plan. The athleisure company is reportedly looking to sell Mirror, but the topic didn’t come up during Thursday’s earnings call.
Commitment to women
The brand recently announced the Further initiative, which Lululemon CEO Calvin McDonald said will demonstrate “how far women can go when they’re supported with resources and product innovations typically reserved for men.”
The Further initiative also includes a scientific research program that McDonald said takes a holistic approach to address the existing sex and gender data gap in endurance performance, along with new product innovations, community activations and a give-back component that supports young women.
The program will culminate in a multi-day women-only ultra marathon starting on International Women’s Day 2024 (March 8th).
Tapping into ‘Dupe Culture’
Lululemon reported massive success with a creative approach to proving that their leggings are better than any other brand.
The athleisure company held a two-day Align dupe leggings swap in Los Angeles at Century City Mall, where guests were asked to trade their duplicate leggings for a pair of Lululemon’s iconic Align leggings.
“For us, the primary purpose of this event was new guest acquisition and increasing brand awareness for being ‘the original’ in leggings. Overall, It was a resounding success,” reported McDonald. “It generated more than a billion earned media impressions and was covered by national and international media outlets. In addition to creating viral social media buzz, about 50% of the guests who traded in dupes are new to our brand.”
International expansion
Lululemon underscored its target to quadruple its business outside North America between 2021 and 2026.
“This will be driven predominantly by our existing markets, but we will be entering some exciting new markets as well,” confirmed McDonald. “In 2022, international represented only 16% of our revenue and I remain optimistic about our runway of global growth.”
Q1 revenue in North America increased 17%, while Lululemon reported 60% growth internationally.
“In greater China, we experienced a significant sequential acceleration in the business relative to Q4 as the effects of COVID-19 subsided,” said McDonald. “In total, revenue in greater China increased 79% in Q1 ahead of our expectations and is just one more sign of the potential within this market.”
McDonald referenced a visit to Shanghai in mid-April for the first time in three years and noted how much Lululemon had grown in the city. The brand expects to continue local campaigns to drive brand awareness in China with market-specific activations.
The brand is also off to a “great start” in Spain, McDonald said, which Lululemon entered last fall. With the help of a franchise partner, the brand also recently opened the doors to its first store in Tel Aviv.
In the coming months, Lululemon will enter Thailand with its first store in Bangkok.
“I’m excited for what the future holds for our global business,” McDonald said.
Key numbers
Lululemon’s financial results for Q1 of 2023, compared to Q1 of 2022:
- Net revenue increased 24% to $2.0 billion
- Net revenue increased 17% in North America and increased 60% internationally.
- Gross profit increased 32% to $1.2 billion and gross margin increased 360 basis points to 57.5%.
- Income from operations increased 54% to $401.4 million.
- The company opened seven net new company-operated stores during the first quarter, ending with 662 stores.
