Lululemon
This is a stark difference from reports from other retailers which are showing a drop in spending on more expensive items while spending on food and gasoline increase. This has had a material impact on earnings due to a difference in margins. And, it's clear evidence that inflation is having an impact on the lower and middle class.
In the same way, Lululemon's earnings report is showing that these developments haven't yet affected the behavior and spending of higher-income earners. It's also interesting to note that since the stock market rebound began on May 20, luxury and premium retailers have outperformed.
Inside the Numbers
In Q1, Lululemon reported $1.48 in earnings per share, exceeding expectations of $1.43 per share. This was a 33% increase from last year. Revenue came in higher than expected at $1.61 billion vs $1.53 billion and was up 32%.
Notably, the company had raised prices across the board late last year to offset higher freight and raw material costs. There was also no drop-off despite some believing that sales of athleisure could decline if the economy returned to normal. So far, Lululemon's organic growth is enough to offset these concerns.
Same-store sales increased by 28% which was better than expectations of 20.4%. Women's sales were up 24% and men's were up 30% compared to 2019 levels. The company is also benefiting from its recent introduction of footwear and skin care products.
It also upped its full-year guidance to a range of $7.61 billion and $7.71 billion which was above analysts' forecast of $7.54 billion in revenue. In terms of earnings, it sees EPS between $9.35 and $9.50 per share, also above expectations of $9.28 per share.
There remain considerable risks around the retail sector, especially with uncertainty about the economic outlook. However, it's clear that Lululemon is among the best of the bunch. Therefore, it could be one of the few worth buying on the dip.
