Inside the Numbers
In Q2, Lululemon reported $1.65 in earnings per share which was substantially higher than expectations of $1.19 per share. Further, it was more than a 100% increase from last year's Q2 EPS of $0.61 per share. It also marked the fourth straight quarter that the company beat in terms of EPS expectations.
Revenue also topped expectations at $1.45 billion vs. $1.34 billion. This was a 61% increase from last year's Q2.
Lululemon was a retailer that did well during the pandemic as sales of comfortable and athletic attire increased, while sales of formalwear collapsed. Contrary to expectations, Lululemon's sales have remained strong as the trend towards athleisure seems to be outlasting the pandemic.
Lululemon's outlook for Q3 and for the full year also came in above expectations. For Q3, it expects revenue between $1.4 billion and $1.43 billion and EPS between $1.33 and $1.38. This was above analysts' expectations of $1.32 in EPS and revenue of $1.32 billion.
For the full year, it anticipates revenue between $6.19 billion and $6.26 billion. Adjusted earnings per share are expected to be between $7.38 and $7.48. Analysts had been looking for Lululemon EPS of $6.91 and $5.94 billion in revenue.
The company has momentum across all of its segments as North American sales were 63% higher and 49% up internationally. For the full year, men's sales are expected to double, and it anticipates that international sales will quadruple by 2023.
The company didn't give precise details of its in-home fitness product, Mirror, but it did say that it has Mirror shops in 150 Lululemon stores which would increase to 200 by the end of the year. It did say that marketing expenses would increase due to increased competition in the segment.
Stock Price Outlook
There's very little to be bearish about given Lululemon's results. In fact, nearly every analyst covering the stock revised EPS estimates higher for Q3 and the rest of the year. It seems that the athleisure trends are bigger than the pandemic as momentum remains strong. And, the company's new launches in terms of segments beyond athletic apparel and into more casual clothes and men's clothes are also quite successful.
Therefore, investors should continue adding to the stock on weakness despite its recent strength.