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March 31, 2022

Lululemon Athletica annual revenue surpasses $6bn for first time

Canada's Lululemon Athletica has surpassed the $6bn in annual revenue milestone for the first time in 2021.

By Beth Wright

In surpassing its $6bn annual revenue milestone Lululemon Athletica has also achieved its Power of Three growth target ahead of schedule.

Lululemon Athletica has published its results for the fourth quarter and fiscal year ended 30 January.

  • Q4 net revenue increased 23% to $2.1bn. On a constant dollar basis, net revenue increased 23%.
  • Total comparable sales increased 22%, with comparable-store sales up 32% and direct-to-consumer (DTC) net revenue rising 17%, or 16% on a constant dollar basis. DTC net revenue represented 49% of total net revenue compared to 52% for the fourth quarter of 2020.
  • Net income amounted to $434.5m, compared to $329.8m a year earlier.
  • Gross margin decreased 50 basis points to 58.1%.
  • FY net revenue increased 42% to $6.3bn. On a constant dollar basis, net revenue was up by 40%.
  • Gross margin increased 170 basis points to 57.7%.
  • Net income was $975.3m, compared to $588.9m a year prior.
  • For fiscal 2022, Lululemon expects net revenue to be in the range of $7.49-$7.62bn, representing growth of 20-22%.

“2021 was another successful year for Lululemon, which speaks to the enduring strength of our brand and our ability to deliver sustained growth across the business. We are proud that we passed the $6bn in annual revenue milestone for the first time, and successfully achieved our Power of Three growth target ahead of schedule. This was especially impressive given the challenging macro backdrop,” says Lululemon Athletica CEO Calvin McDonald. “We are entering the new year from a position of strength, which we’ll build upon to continue delivering for our guests and shareholders in the years to come.”

Commenting on the results, Neil Saunders, managing director of GlobalData, notes despite lapping very tough prior year comparatives and battling the impact of Omicron, Lululemon Athletica posted a very strong set of final quarter numbers.

“Year-over-year sales rose by 23.1% or by $399m in cash terms. On a two-year basis, sales were up by 52.4%, the equivalent of a $732m gain. On the bottom line, net income increased by a robust 31.7%.

“One of the things that demarcates Lululemon from other retailers is that the high growth in its current fiscal year isn’t simply a function of bouncing back after a weak period during the pandemic. Indeed, apart from a couple of soft quarters during the early part of the Covid crisis when almost all physical stores were mandated to close, Lululemon has posted consistent, and often heady, growth. The main reason for this is because the company has been on the right side of various demand trends, many of which are not completely dissipating as we emerge from the pandemic.

“Foremost among these is the pivot to more comfortable apparel as social occasions and working from the office have been curtailed. With its carefully designed products, Lululemon has been a big beneficiary of people looking for well-fitting garments that are easy to wear at home but stylish enough to be seen out in. Lululemon has always been a leader in this space, but a change in consumer behaviors has paid dividends in the form of more customers and higher spending.

“The second significant driver of demand is a focus on wellness which, as the pandemic has abated, has come back strongly with more people going back to gyms and looking to improve their health after a couple of years of disruption. Although the Omicron scare briefly interrupted this trend during December, the fourth quarter as a whole was one in which many consumers looked to kit themselves out with new fitness attire – something that helped Lululemon significantly.

“The final trend, which was more specific to the fourth quarter, was an increase in the number of people buying athletic and fitness products either as gifts for others or treats for themselves. This is clearly linked to other market trends, but it helped to make Lululemon a key brand and destination for holiday gifting – especially in the accessories category. This was very evident in many stores where lines were extremely long in both late November and December. Online traffic was similarly elevated.

“With such a robust demand environment, the real challenge for Lululemon in the final quarter was in meeting, not in securing, demand. In our view, the company did a good job of this, but supply chain issues caused some shortages – despite air freight being used to avoid delays. In our view, this cause a small, but meaningful, deterioration in the overall growth rate.

“Looking ahead, the key question is whether the various tailwinds that have helped Lululemon will keep blowing in the right direction. As we put the pandemic behind us, there is no doubt that consumer habits will change again, even if only subtly. On this front we are pleased by Lululemon’s product pipeline which has a greater focus for ‘on the move’ products, which will be interesting to those resuming travel. There is also more emphasis on specific sports such as golf and tennis, which should allow Lululemon to widen its audience and deepen spend with some existing shoppers. At the heart of all of this is a focus on product innovation. This is an area where Lululemon has always excelled, and we are encouraged to see that its focus here remains undiminished.”

Lululemon recently entered the footwear market with the release of its first-ever footwear collection.

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