Skip to content
Join our Newsletter

Lululemon shares soar 10% after hours on strong earnings

Full year profit jumped 87% on sales growth that topped 24%
lululemonrobsonburrardbychung
Lululemon's store at the corner of Robson Street and Burrard streets is likely its flagship store in Metro Vancouver | Chung Chow

Vancouver-based yogawear retailer Lululemon Athletica Inc. (Nasdaq:LULU)’s final quarter of its 2018 fiscal year impressed analysts and prompted its shares to rise nearly 10% after hours.

Revenue in the quarter that ended February 3, 2019 was US$1.17 billion, which was about 26% more than the same quarter a year earlier, although the company’s 2018 fourth quarter included one extra week.

Profit in the quarter soared 82% to US$218.47 million, compared with US$119.76 million in the same quarter a year earlier.

For the full year, Lululemon generated US$3.29 billion in sales and took home US$483,801 in profit. That compared with US$2.65 billion in revenue the previous year, and US$258,662 in profit. Those stats translate into a sales increase of 24.1% year over year, and profit growth of 87% – clearly a company that is firing on all cylinders.

lululemon after hours march 30

(Image: Lululemon shares were up more than 10% in after-hours trading March 30 | Google Finance) 

The company’s earnings release did not break out sales outside Canada and the U.S., although Lululemon sent Business in Vancouver a data sheet that said that sales in its Asia stores were up more than 70%, and sales in its European stores were up 55%.

CEO Calvin McDonald said on the company's conference call that growth within the U.S. and Canada is the company's "largest and most important" opportunity in the near term.

He added later in the call, however, that expansion outside of North America is "one of our strategic growth pillars, and we continue to execute on our plans to build out key markets within Asia and Europe."

One example of Lululemon's recent international expansion has been what McDonald called a "shop-in-shop" in the iconic department store Le Bon Marché in Paris.

"Our business in Europe continues to perform well," he said. "We're happy with our progress and remain very positive about our future opportunities in the region."

International expansion has recently been key to Lululemon’s success, as BIV documented in this extensive article late last year. That success also stands in contrast to the company’s early days. In the company's original bid to expand beyond Canada and the U.S., Lululemon opened franchised stores in Australia in 2004 and Japan in 2005, but they struggled. Lululemon then bought out its franchisees and shuttered most overseas locations in 2008.

GlobalData Retail managing director Neil Saunders in a statement sent to BIV called Lululemon "one of the brightest stars in the retail sector.”

That is both because the company is adding to its number of shoppers as well as increasing the average transaction value. 

“Admittedly, the pace of new customer acquisition has slowed over the past couple of years as Lululemon has matured and become a bigger business,” he said. “However, we still see significant potential for future customer growth.”

Saunders does not think that Lululemon’s public exposure is anywhere as high as bigger brands, and there are areas of the business where there is still potential, such as among men, older customers, and occasional fitness and wellness shoppers.

He added that Lululemon is doing exceptionally well is in its investments in stores and on the digital side of its business and that this helped drive revenue by better showcasing what it has to offer and making the purchase process more convenient for shoppers.

For the 2019 fiscal year, Lululemon expects its sales to be in the range of US$3.7 billion to US$3.74 billion, based on a total comparable sales increase in the low double digits on a constant dollar basis.

[email protected]

@GlenKorstrom