Lululemon’s total net revenue for Q3 (ending 30 September 2023) increased 19% to $2.2bn which the company said was primarily due to increased company-operated store revenue, including from new company-operated stores and increased comparable store sales, as well as due to increased direct-to-consumer net revenue.
Geographically, its net revenue was up 12% in North America and 49% internationally. Total comparable sales also increased 13% or 14% on a constant dollar basis.
Lululemon operating income for Q3 was down to $338.1m in the third quarter of 2023, compared to $352.4m in the same period last year.
While net income was reported at $248.7m.
Lululemon CEO Calvin McDonald said: “This was another strong quarter for lululemon as our innovative product offerings and community activations continued to powerfully resonate with our guests globally.”
He also pointed out on the investor call both the top and bottom line results for Q3 “exceeded expectations”.
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Key numbers from Lululemon Q3
- Net sales increased 19% to $2.2bn
- Operating income was $338.1m or 15.3% of net sales compared to $352.4m, or 19.0% of net revenue in Q3 2022
- Net income was $248.7m or $19.96 per diluted share compared to $2.00 per diluted share in Q3 2022.
Black Friday and Thanksgiving sales
McDonald noted the company is pleased with its early performance for the holiday season so far and said it is “well-positioned to deliver for our guests in the fourth quarter”.
He revealed Black Friday 2023 was the “single biggest day” in company history, with strength across its store and e-commerce channels.
McDonald believes the company’s overall performance was driven by strength across both full price and markdown merchandise.
Apart from this, he mentioned that Lululemon expanded its offerings this year by providing an extra perk to Essentials members who received early access to the Black Friday styles through the shop app. This strategy drove a significant spike in app downloads, with virtually no incremental marketing costs, he noted.
McDonald continued: “Our overall success was enabled by the ongoing foundational investments we’ve been making to our DC network and IT infrastructure to enhance the guest experience, both in stores and online. And while there is nearly two-thirds of the quarter still ahead of us, we are encouraged by our trends at the start of the holiday season. This was another strong quarter for lululemon as our innovative product offerings and community activations continued to powerfully resonate with our guests globally. As we enter the holiday season, we are pleased with our early performance and are well-positioned to deliver for our guests in the fourth quarter.”
Cautious outlook moving forward
For Q4, Lululemon’s chief financial officer Meghan Frank shared that Lululemon expects revenue for Q4 in the range of $3.135bn to $3.170bn, representing growth of 13% to 14% which is lower than what the company reported for this quarter.
She said Lululemon will continue to plan the business “prudently” with two-thirds of the quarter still remaining.
The company expects to open approximately 25 net new company-operated stores in Q4 and for gross margin in Q4 to increase 90 basis points to 120 basis points relative to Q4 of 2022.
For full year 2023, Lululemon now expects revenue to be in the range of $9.549bn to $9.584bn.
Frank explained this range represents growth of 18% relative to 2022 and exceeds the revenue target in Lululemon’s Power of Three x2 growth plan.
She added: “We expect to open approximately 55 net new company-operated stores in 2023 and complete approximately 25 to 30 co-located remodels. This will contribute to overall square footage growth in the low to mid-teens.
“Our new store openings in 2023 will include approximately 35 stores in our international markets, with the majority of these planned for China. For the full year, we continue to forecast adjusted gross margin to increase between 190 basis points to 210 basis points versus 2022. The expansion relative to last year is driven predominantly by lower airfreight expense. For the full year, we now expect airfreight to be down approximately 220 basis points versus 2022.”