Lululemon Athletica (LULU 1.96%) stock popped 2.2% in Thursday's after-hours trading session after the athletic wear retailer released a robust report for its first quarter of fiscal 2022 (which ended May 1).
The market's positive reaction is attributable to the quarter's revenue and earnings both coming in higher than Wall Street had expected, second-quarter guidance exceeding the analyst consensus estimates on both the top and bottom lines, and management raising its full-year outlook for revenue and earnings.
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Lululemon's key numbers
| Metric | Fiscal Q1 2022 | Fiscal Q1 2021 | Change |
|---|---|---|---|
| Revenue | $1.61 billion | $1.23 billion | 32% |
| GAAP operating income | $260.3 million | $193.8 million | 34% |
| Adjusted operating income | $260.3 million | $201.5 million | 29% |
| GAAP net income | $190.0 million | $145.0 million | 31% |
| Adjusted net income | $190.0 million | $152.2 million | 25% |
| GAAP earnings per share (EPS) | $1.48 | $1.11 | 33% |
| Adjusted EPS | $1.48 | $1.16 | 28% |
Data source: Lululemon Athletica. GAAP = generally accepted accounting principles. Fiscal Q1 2022 ended on May 1.
Investors should focus on the adjusted numbers. They exclude one-time items.
Wall Street was looking for adjusted EPS of $1.43 on revenue of $1.53 billion, as outlined in my earnings preview. So Lululemon surpassed both expectations. The company also beat its own guidance, which was for adjusted EPS of $1.38 to $1.43 and revenue of $1.525 billion to $1.55 billion.
Revenue growth was driven by a 24% year-over-year increase in company-operated same-store sales and a 32% jump in direct-to-consumer (DTC) revenue. DTC sales accounted for 45% of total sales in the quarter, slightly up from 44% in the year-ago period. Lululemon opened five net new company-operated stores during the quarter, ending the period with 579 stores.
Revenue growth was strong across regions, with 32% and 29% increases in North America and internationally, respectively.
Lululemon ended the period with $649 million in cash and cash equivalents, down from $1.18 billion in the first quarter of last fiscal year. The decline is due in part to the company increasing inventory relative to the year-ago period to support expected demand.
NASDAQ: LULU
Key Data Points
Early sales for debut shoe better than expected
On the earnings call, CEO Calvin McDonald had this to say about the company's first shoe, the Blissful running shoe for women, which it launched in March:
[W]e were proud that it was named the best women's specific shoe in 2022 by Runner's World. The response has been enthusiastic. And since we were prudent with our inventory buys, we have seen out-of-stocks. Although we expect to be in a better inventory position in the coming weeks, demand has far exceeded our sales forecast.
Management didn't provide information on the earnings call about the performance of Mirror, the company's still relatively new home connected-fitness business.
Guidance issued for second quarter and raised for full-year 2022
| Metric | Current Guidance | Prior Guidance | Annual Growth Implied by Current Guidance* |
|---|---|---|---|
| Fiscal Q2 revenue | $1.750 billion to $1.775 billion | N/A | 21% to 22% |
| Fiscal Q2 adjusted EPS | $1.82 to $1.87 | N/A | 10% to 13% |
| Fiscal 2022 revenue | $7.61 billion to $7.71 billion | $7.49 billion to $7.615 billion | 22% to 23% |
| Fiscal 2022 adjusted EPS | $9.35 to $9.50 | $9.15 to $9.35 | 20% to 22% |
Data source: Lululemon. Fiscal Q2 2022 is essentially the May-to-July period. *Calculated by author.
Going into the report, Wall Street had been modeling for Q2 adjusted earnings of $1.77 on revenue of $1.71 billion. So, Lululemon's outlook came in higher than analysts had been expecting on both the top and bottom lines.
Another winning quarter
In fiscal Q1, Lululemon's year-over-year growth on both the top and bottom lines continued to grow at a fast pace. The company's performance is even more impressive given the challenging macroeconomic backdrop, most notably the continued disruptions in global supply chains.
Management's bright 2022 outlook means investors can probably expect continued robust growth.
