Please ensure Javascript is enabled for purposes of website accessibility

Lululemon Earnings: How the Chain Doubled Store Volumes While Online Sales Surged

By Demitri Kalogeropoulos – Jun 11, 2021 at 6:21AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The apparel specialist raised its 2021 outlook again.

It was never a question of whether lululemon athletica (LULU -4.28%) would report a first-quarter sales rebound this past week. The apparel chain was going up against a year-ago period that included some of the most intense lockdown weeks of the pandemic. A year later, its rebound was sure to be strong.

But Lululemon recently announced some head-turning metrics, including an over 100% increase in store-based revenue. Its digital sales channel kicked in even more gains to put the company on pace for an even brighter 2021 than executives had predicted just a few months ago.

People in a yoga class.

Image source: Getty Images.

Sales are booming

Lululemon logged a 106% increase in sales at its stores, which is understandable given that a large number of its locations were either closed or operating at dramatically reduced capacity in early 2020. Yet that rebound came even as the digital sales channel continued to surge, with sales jumping 55%. Lululemon logged more business from its e-commerce segment than from its brick-and-mortar stores, in fact, which helped push overall revenue higher by 88%. Investors had been looking for a much more modest 70% hike.

Executives eliminated some of the noise from the pandemic by releasing two-year growth figures. Lululemon's sales are up 57% compared to this time two years ago, equating to a 25% compound annual expansion rate. "Our strong performance across categories, channels and geographies," CEO Calvin McDonald said in a press release, "demonstrates the momentum and strength of lululemon as we shift into the new normal."

Doubling profits

Gross profit more than doubled to $700 million as the company largely avoided the type of supply chain challenges that had tripped up Nike in early 2021. Margins are rising thanks to the combination of surging sales and a demand tilt toward premium athleisure products.

The profitability story isn't as positive as the demand rebound, though. Operating margin is roughly flat over the last two years as gains in gross profit have been offset by extra spending in areas like e-commerce fulfillment, shipping, and labor.

Still, investors have to be happy to see adjusted earnings jump to $1.16 per share in Q1 compared to $0.23 a year ago. "The strength of our financial position," CFO Meghan Frank said, "allows us to continue to delivery against our ... growth strategies while we leverage both near-term and long-term opportunities."

Looking ahead

That near term is getting brighter. Lululemon now sees sales landing at between $5.8 billion and $5.9 billion in 2021. Three months ago, executives had been targeting $5.6 billion of sales. The apparel giant has several major growth levers it can pull in the next few years, too, including its international expansion and a push into new demographics like menswear. Executives are excited about the opportunity around seasonal pop-up stores and an accelerating pace of new product release.

These attractive trends all suggest Lululemon might just be getting started on its growth path as of early 2021. The chain can now reasonably target $6 billion of annual sales just two years after crossing the $4 billion mark in 2019.

Demitri Kalogeropoulos owns shares of Nike. The Motley Fool owns shares of and recommends Lululemon Athletica and Nike. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$293.20 (-4.28%) $-13.10
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$97.02 (-1.55%) $-1.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.