Shares in Lululemon Athletica soared by 11.55% in pre-market trading this morning (28 March) after the Canadian yogawear retailer almost doubled its fourth-quarter profits and hailed fiscal 2018 as one of its “strongest years.”
For the three months ended 3 February, net income jumped 82.4% to $218.5m from $119.8m in the same period a year earlier, while gross margin was 57.3%, an increase of 100 basis points compared to the fourth quarter of fiscal 2017.
The Vancouver, British Columbia-based company also reported a 26% hike in quarterly net revenue to $1.2bn, while on a constant dollar basis, net revenue increased 27%.
Excluding net revenue from the 53rd week of fiscal 2018, total comparable sales increased 16%, and saw a rise of 17% on a constant dollar basis. Comparable store sales were up by 6% (up 7% on a constant dollar basis), while direct to consumer net revenue surged 37% (39% on a constant dollar basis).
For the full year, Lululemon said net income totalled $483.8m, an 87% hike on earnings of $258.7m the previous year. Gross margin was up 240 basis points to 55.2%, an increase of 240 basis points compared to fiscal 2017.
Net sales in the 12 months rose 24% to $3.3bn, increasing 25% on a constant dollar basis. Excluding net revenue from the 53rd week of fiscal 2018, total comparable sales increased 18%, while comparable store sales were up 7% (8% on a constant dollar basis. Direct to consumer net revenue surged 45% (46% on a constant dollar basis).
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By GlobalData“Lululemon has delivered one of its strongest years yet, a result of broad-based strength across the business,” said CEO Calvin McDonald. “We are energised to build upon our momentum and to seize the many opportunities ahead for Lululemon around the world.”
Looking ahead, the yogawear retailer said it expects net revenue to be in the range of $740m-$750m for the first quarter of fiscal 2019, based on a total comparable sales increase in the low-double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $0.68 to $0.70 for the quarter.
For the full fiscal year, meanwhile, it forecasts net revenue of between $3.7bn and $3.74bn based on a total comparable sales increase in the low-double digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $4.48 to $4.55 for the full year.
“One of the brightest stars in the retail sector”
Neil Saunders, managing director of GlobalData Retail, notes Lululemon surpassed the billion-dollar sales mark in its final quarter, making it “one of the brightest stars in the retail sector.”
According to Saunders, Lululemon is expanding its shopper numbers as more consumers discover its brand and products, and it is also selling more to existing shoppers. “Part of this is down to the expansion into non-traditional fitness categories such as business casual – a move that has been well received and superbly executed. Product extensions are usually fraught with risk as they can easily dilute the focus and purpose of a brand. However, Lululemon has maintained its core emphasis on producing mindful products that have great design with superior functionality. Outside of this, in core fitness ranges, more exciting colors and designs, especially in menswear, have stimulated more frequent purchasing.”
He also notes that Lululemon’s investments in stores and digital have helped to drive revenue by better showcasing the whole offer and by making buying more convenient for shoppers.
“Ultimately, all of Lululemon’s success and its future potential come down to a very clear brand vision which is flawlessly executed. This stands in marked contrast to many other retail operators and it is the core reason for Lululemon’s enduring popularity and continued growth,” Saunders says.
