Energized by e-commerce sales and continued changes in shopping patterns, athleticwear retailer lululemon athletica (LULU -1.25%) reported very strong third-quarter (Q3) results yesterday after market close, surpassing both Q3 2019's results and analyst consensus expectations.
The company's adjusted earnings per share (EPS) of $1.16 topped last year's $0.96 EPS by 20.8% and delivered a 33.3% positive surprise above Wall Street's $0.87 estimate, Zacks Equity Research reports. $1.12 billion in revenue jumped approximately 22.3% year over year from $918.1 billion and surprised by being 10.3% over consensus.
A closer look at Lululemon's press release shows it appears to be executing successfully on its e-commerce strategy and direct-to-consumer sales. Comparable-store sales at brick-and-mortar locations dropped 18% year over year, yet the company managed to grow its revenue and earnings vigorously anyway. It reported that direct-to-consumer sales soared 94%, rising from 26.9% of sales in Q3 2019 to 42.8% of sales in Q3 2020.
In light of these factors, the company has "planned the fourth quarter based on multiple performance scenarios" and should be "well positioned for the holiday season," according to CFO Meghan Frank. However, the company declined to provide any specific guidance for the future, citing COVID-19's unpredictability.
Given the rollout of coronavirus vaccines and its own success at replacing lost brick-and-mortar sales with direct-to-consumer sales, Lululemon might be slightly overcautious with its refusal to issue guidance. The company appears positioned for a successful 2021 given its strong switch to e-commerce, likely market improvements after vaccination begins to reduce the pandemic's hold, and position in an apparel sector growth market.