• Net revenue increased 22% to $1.1bn in the three months to 31 October, versus the same period last year.
  • Total comparable sales were up 19%.
  • Net revenue jumped 19% in North America, and increased 45% internationally.
  • Net income rose 14% to $143.6m, up from $126m in last year's quarter. 
Q3 net revenue soared 22% to $1.1bn

Q3 net revenue soared 22% to $1.1bn

While a V-shaped recovery may not be materialising for most of apparel retail, Lululemon Athletica has bounced back from the weak start to its year with a stunning set of third quarter numbers. 

Sales grew by just shy of 22% to $1.1bn, meaning that Lululemon is now expanding at the same rate as it was pre-pandemic. The strong uplift also means that Lululemon has more than recovered the sales losses of the torrid first quarter, with revenue in the year-to-date up 3.5% over 2019. 

Lululemon is operating in one of the few parts of the apparel market that is currently growing, and this has undoubtedly aided the swift recovery. 

However, by our estimates overall spend on athleisure in the US increased by 13.4% during the quarter. So, Lululemon's 19% growth within the States is well above average which underlines that the brand is outperforming and taking market share. 

Lululemon's superior growth partly stems from the loyalty of its core customers, who continue to spend with the brand. A lot of these consumers are health conscious and have been very active at home and in small groups during the pandemic as they continue their yoga and exercise practices. 

This means that demand for workout apparel has not really dissipated for Lululemon. Indeed, there is evidence to suggest that a lot of purchases delayed in the first two quarters were pulled into this current trading period as consumers invested in new garments.

Our data also show that Lululemon has picked up plenty of new shoppers, especially in womenswear. Many of these are not as health focused as core consumers, but they are switching into easy-to-wear apparel for everyday use. 

The brand cachet of Lululemon and its reputation for fit and comfort have been particularly appealing to this group. Many have also been happy to accept Lululemon's relatively high prices as they are saving money on spending on clothing for work and going out. 

The question is, of course, how many of these consumers can Lululemon keep once the pandemic subsides. Our view is that it will keep some and that will be enough to give the company a nice lift in the years ahead.

While Lululemon is back on track from a sales perspective, trading is not completely normalised. Online continues to make an outsized contribution to growth, although digital penetration is now back under 50% thanks to stores reopening. 

While we estimate that store sales were down this quarter, the 4.6% decline is much shallower than many mall retailers which underlines the destination status of many of Lululemon's stores. 

While there is no doubt that it will take time for consumers to come back to physical shops, we still see these as being central to Lululemon's success. Indeed, we maintain our view that the experiences Lululemon was creating in stores before the pandemic will be just as relevant to growth once the virus abates.

Looking ahead, we believe that the final quarter will be a solid one for Lululemon. The brand appears on a lot of Christmas gift lists and we also believe self-treats will be an important driver of sales over the holidays. 

With the focus on wellness still foremost of mind, January should bring some nice growth as consumers exercise more to burn off the excesses of the holidays. Of course, this could be partly blown off course by the pandemic but, even if more stores close the direct channel should pick up the slack.

We are optimistic about Lululemon's future. Innovation remains at the heart of its growth plan as is evidenced by the roll out of Mirror and its ideas for new yoga mats. This is a company that, despite the turmoil of 2020, remains firmly on the front foot.