Lululemon Athletica Inc (Nasdaq: LULU) reported better-than-anticipated fiscal 2021 second-quarter profit and revenues, aided by strong demand for work-from-home clothes and even feel-good clothing for going back to the office. The athletic apparel retailer also issued upbeat guidance for 3Q 2021 and lifted the FY 2021 outlook. Following the results, the stock hit a 52-week high of $434.22 before closing at $420.71, reflecting a gain of $39.86 or 10.47% from the prior close.
The Vancouver, British Columbia-based company, reported second-quarter revenues of $1.451 billion, an increase of 61% from $902.94 million in the similar quarter last year.
Specifically, the revenue of company-run stores increased 142% y-o-y to $695.10 million. Direct-to-consumer net revenue rose by 8% to $597.40 million. While North American revenue grew 63%, international revenue rose by 49%.
The athletic accessories retailer pointed out that consumers used its online platform to purchase jogging and stretchy pants, sports bras, and leggings, reflecting a rising shift towards the supposed athleisure that is having a positive impact on retailers such as Nike and Lululemon.
For the quarter ended August 1st, 2021, Lululemon posted a net income of $208.07 million, or $1.59 per share, an increase from $86.801 million, or $0.66 a share, in the quarter ended August 2nd, 2020.
Excluding transaction and integration costs and acquisition-related compensation, among others, Q2 2021 non-GAAP net income was $215.783 million, or $1.65 per share, an increase from $96.298 million, or $0.74 a share, in Q2 2020.
Analysts surveyed by Refinitiv had anticipated the company to report earnings of $1.19 per share on revenues of $1.34 billion for the reported period.
Commenting on the results, Meghan Frank, Lululemon’s CFO, said, “Our performance in Q2 was driven by a strong response to our product offering, improving productivity in our stores, and sustained strength in e-commerce.”
The company revealed that its women’s and men’s business increased 26% and 31% on a two-year basis. Furthermore, Lululemon stated that it is on course to achieve its 2023 revenue target by the end of 2021, i.e., two years before the target date.
Adjusted income from operations rose by 120% to $299.20 million. Also, the adjusted operating margin grew 560 basis points to 20.60%. Lululemon bought back 0.50 million shares at an average price of $338.41 per share in the second quarter, translating to a cost of $171.10 million. Furthermore, 11 new shops were opened, taking the tally of company-operated stores to 534 in the second quarter.
The yoga pants retailer issued a robust Q3 and FY 2021 outlook as it expects the momentum to increase in the months ahead.
Looking ahead, the company anticipates Q3 revenues in the range of between $1.40 billion and $1.43 billion. Adjusted earnings are forecast to be in the range of $1.33 to $1.38 per share. Analysts surveyed by Refinitiv had anticipated the company to report earnings of $1.32 per share on revenues of $1.32 billion for the reported period.
For FY 2021, Lululemon now predicts revenues in the range of $6.19 billion to $6.26 billion. Also, adjusted earnings are projected to be between $7.38 and $7.48 per share. Analysts polled by Refinitiv had anticipated the company to earn $6.91 per share on revenues of $5.94 billion.
The company had earlier issued an FY 2021 adjusted earnings outlook in the range of $6.73 to $6.86 per share. Likewise, FY 2021 revenues were anticipated to be between $5.825 billion and $5.905 billion. The outlook did not account for any impact on business by the COVID-19 pandemic.
Despite facing supply chain issues, the brand owner of fitness equipment Mirror stated that it is on track to achieve a 100% increase in men’s business in 2021 and even quadruple its revenue from global business by 2023. To ease supply chain issues, the company has given priority to major fall designs. Furthermore, air freight is being used to circumvent logistics problems. Lululemon also anticipates its suppliers in southern Vietnam to reopen in September.
The company’s CEO, Calvin McDonald, intends to release updated financial objectives after the holiday period gets over.
The quarterly earnings beat and lifting of the FY 2021 outlook are expected to keep the stock of Lululemon bullish in the short term.
The historical price chart indicates that the stock is trading above its 50-day moving average. Additionally, the stock has firmly broken the ascending triangle pattern. The MACD indicator also has a positive reading. Therefore, the uptrend is likely to continue in the days ahead.
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