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Lululemon Shares Hit Record High Despite Activewear Uncertainty

Lululemon Shares Hit Record High Despite Activewear Uncertainty

CEO Calvin McDonald noted a challenging macroeconomic environment ahead, even for surging activewear brands like the Canadian giant

Lululemon, having just pulled off the single biggest day in the history of its company with Black Friday, announced its third-quarter fiscal 2023 results, which CEO Calvin McDonald described as another strong quarter for the athleisure brand. 

The Vancouver-based company reported a net revenue increase of 19% to $2.2 billion when compared to Q3 of 2022 and expects net revenue for 2023 to be in the range of $9.549 billion to $9.584 billion, representing a growth of 18%. The activewear brand opened 14 net new company-operated stores during the quarter, ending with 686 stores.

“As we enter the holiday season, we are pleased with our early performance and are well-positioned to deliver for our guests in the fourth quarter,” McDonald said, adding that he’s energized by what he calls “significant opportunities” ahead for the leading activewear brand.

In October, Lululemon was added to Wall Street’s S&P 500 index, causing the activewear brand’s stock price to hit its highest level since December 2021. Lululemon’s shares hit a record high on Friday followng the brand’s Q3 results, which beat estimates.

McDonald touched on Lululemon’s successful Black Friday strategy, where the brand saw a significant increase in app downloads (roughly 250,000+) which allowed Lululemon fans to access special sales. 

Lululemon’s board also authorized a new stock repurchase program for up to $1 billion of the company’s common shares, which McDonald noted reflects the optimism in Lululemon’s growth trajectory.

The brand saw its women’s business increase by 19%, fueled partly by new products, such as the sort and form-fitting Wundermost bodywear. However, Lululemon reports that while its men’s line saw growth of 15% in the third quarter, overall brand awareness remains low (13% in the U.S., 12% in Australia and single digits outside of North America.) 

“Similar to during the COVID-19 period, we see that when there is some uncertainty in the macroenvironment, men can become a bit more conservative in their apparel purchases,” McDonald told investors.

The number of activewear brands targeting male consumers seems to be increasing, as seen with Rhone and Ten Thousand. Lululemon plans to boost its brand awareness with men and has been testing media-based campaigns in the U.S. — a strategy it plans to continue in 2024 when Lululemon launches a new men’s footwear line.

As for its international growth, Lululemon reports that all regions grew in “strong double digits,” with a 53% increase in China. 

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Despite a new high-profile 5-year partnership with Peloton, Lululemon execs didn’t focus on the arrangement on its recent call with investors, except to state that it will no longer produce content or sell Mirror hardware. Meghan Frank, Lululemon chief financial officer, noted a post-tax asset impairment and other charges related to Lululemon Studio, totaling $72.1 million during Q3.

Frank also shed light on Lululemon’s guidance outlook, reiterating that while the company is pleased with the trends seen at the beginning of the holiday season, Lululemon is mindful of the current economic landscape — one that has contributed to NY-based women’s activewear brand Bandier to offload its assets and IP. 

“The majority of the quarter remains in front of us,” she said. “We remain aware of the uncertainties in the macro environment, and we continue to plan the business for multiple scenarios.”

For Q4 2023, Lululemon expects net revenue to be in the range of $3.135 billion to $3.170 billion, representing growth of 13% to 14%.

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