Lululemon Athletica (LULU 0.11%) is on a roll heading into the core holiday shopping season.
In this video from "Beat & Raise," recorded on Dec. 10, Fool contributors Rachel Warren and Demitri Kalogeropoulos break down the results and discuss why the company has raised its outlook so dramatically over the last nine months.
Demitri Kalogeropoulos: Lululemon is a company I know a lot of people know. It's a retailer with a really big online selling presence focused on the athleisure market. A little bit similar, you might say, they compete with the likes of Nike in a few areas. The results were great across the board. We saw Q3 sales for $1.5 billion up 30% compared to a pretty big period last year, and it wasn't long ago, just a couple of years ago that Lululemon was booking one-and-half billion dollars in annual sales.
To see it in just one quarter is pretty good news, I'd say. That's basically was a little bit higher than what Wall Street was expecting and the earnings were up a little bit faster. This is adjusted earnings, a $1.45 a share from around $1.10 a year ago. A couple of highlights. Growth was strong, so this is compared to 2019. Sales were up 26% on a two-year compounded basis compared to 28% last quarter. I know there's a lot of moving pieces there, but the first way to look at that is 26 percent is a really big, good absolute number.
Before the pandemic through 2019, Lululemon was growing at about 19% double year rate and now they are in this 26%, so there's definitely been a step change in their growth. The other thing to notice is that 26% is obviously a little bit lower than 28%, so modest deceleration compared to last quarter. But again, last quarter was a blowout quarter, so it's nothing to be worried about there. It's still just they're clearly getting a lot more business in their stores.
Comparable store sales are spiking and they're still getting a lot of great demand in their online channel, which is almost doubled in two years. Profit margins are looking really strong, too. They are up to 57% of sales and they've been climbing for the last five years. We'll go over that in a little bit. International markets, their growth is fantastic, too, up about 42% in the last few years, they are pushing into places in Asia and Europe, China. Then menswear, which is one of their niches that they're really excited to push the brand into is also up over 40%. Those are all positives and the main drivers, and you can see that's why I'm not really surprised that the stock is doing pretty well, this year it has been volatile. But up until the last two weeks or so when growth got a big target on its back, Lululemon was comfortably beating the market, but it's a little bit below the market at the moment now down about 18%.
As far as their outlook, the company did raise its 2021 forecast for the third straight time and it's a modest boost, but it's still a boost anyway. But they did comment about supply chain and their costs are rising. They're having to pay a lot more for air freight, so they are over the ocean freight they're used to doing to get inventory there. But the good news is they seem to be handling that all right. As I said, overall profitability is still rising.
But management said in the conference call that the they've got basically their heaviest weeks ahead in the next five or so weeks. It's a little bit of a tricky thing to forecast right now, particularly given the big swings in consumer behavior if something happens in the next two weeks in terms of COVID outbreaks or anything like that. I think that's why management is taking a little bit of a conservative bent to the holidays, but everything otherwise look strong like I said, customer traffic spending, consumer attitude seems to be really bullish. I guess people are very excited to spend money in this premium athletic wear niche, so that's just the highlights. Anything jump out for you there in terms of those.
Rachel Warren: A couple of things. Well, one I'm really glad to see to the men's segment is keeping such good stride with the women's segment. I feel like at least for me, and I actually I don't think I've ever shopped at Lululemon before, but I'm very aware of, but I feel like I see it all on social media of influencers wearing Lululemon. But I think it's something that in society we think of as like women's apparel. But they have a lot of men's apparel and I think very key to their future growth to remain competitive as you have so many retailers that are entering the space and also some of which have not done so well.
I think key to their growth is to remain competitive in both of those segments and it looks like they're doing a really good job of that. Another thing that was interesting was noticing how the stock has been closely trailing the S&P 500 for a little bit, even though it's lagging slightly behind over the last year. But over the last five years, Lululemon has returned more than 500% in share price appreciation. That blew me away. But those are my two thoughts there.
