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lululemon athletica inc. (LULU - Free Report) reported third-quarter fiscal 2024 results, wherein revenues and earnings beat the Zacks Consensus Estimate and improved year over year. The company’s top line improved year over year due to continued strength in the international business and improvement in the Americas.
lululemon’s fiscal third-quarter earnings per share (EPS) of $2.87 increased 13.4% year over year compared with adjusted EPS of $2.53 in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of $2.69.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company remains on track with the Power of Three X2 growth plan. LULU outlined the guidance for the fiscal fourth quarter and raised its revenue and EPS guidance for fiscal 2024.
Shares of lululemon have rallied 9.2% in the after-hours trading session yesterday, following the strong third-quarter fiscal 2024 performance and a raised fiscal 2024 view. This Zacks Rank #3 (Hold) company has seen its shares rally 50.9% in the past three months compared with the textile apparel industry’s gain of 24.6%.
Image Source: Zacks Investment Research
LULU’s Q3 Earnings Overview
The Vancouver, Canada-based company’s quarterly revenues advanced 8.7% year over year to $2.397 billion and outpaced the Zacks Consensus Estimate of $2.355 billion. On a constant-dollar basis, net revenues improved 8% year over year in the fiscal third quarter. Net revenues grew 2% in the Americas on both reported and constant-dollar basis and 33% internationally (up 30% on a constant-dollar basis).
Total comparable sales (comps) rose 4% year over year and 3% on a constant-dollar basis. Comps in the Americas declined 2% year over year. Internationally, comps increased 25% and 22% on a constant-dollar basis.
In the store channel, the company’s total sales increased 13% in the fiscal third quarter. Digital revenues improved 4% year over year and contributed 39% to the total revenues.
The gross profit improved 9% year over year to $1.4 billion. Also, the gross margin expanded 40 basis points (bps) to 58.5%, led by a 50-bps rise in the product margin, flat markdowns, a 20-bps deleverage on fixed costs, and 10-bps positive impacts of foreign exchange.
Management also noted that gross margin growth in the quarter was ahead of its guidance of a 50-60 bps year-over-year decline. The increase relative to the company’s guidance was fueled by effective management of fixed expenses within the gross margin, improved IMU, reduced distribution center operating costs, and the timing of expenses for specific store real estate projects. We expected the gross margin to contract 50 bps year over year to 57.6% for the fiscal third quarter.
lululemon athletica Stock Price, Consensus and EPS Surprise
SG&A expenses of $909.8 million increased 8% from the year-ago quarter. SG&A expenses as a percentage of net revenues of 38% declined 20 bps from 38.2% in the prior-year quarter. The decline in SG&A expense rate was less than a dip of 40-50 bps anticipated by the company, mainly due to a 20-bps impact from foreign exchange.
Our model predicted SG&A expenses to rise 5.6% year over year for the fiscal third quarter, with a 50-bps decline in the SG&A expense rate to 37.7%.
The operating income rose 12.5% year over year to $490.7 million in the fiscal third quarter. The operating margin of 20.5% expanded 70 bps year over year. Our model predicted a 7.4% year-over-year increase in adjusted operating income. We estimated the operating margin to increase 10 bps year over year to 19.9%.
Snapshot of lululemon’s Store Plans
In the fiscal third quarter, LULU opened 28 company-operated stores. This included 14 company-operated stores from the acquisition of the Mexico operations. As of Oct. 27, 2024, LULU operated 749 stores.
For the fourth quarter of fiscal 2024, lululemon plans to open 18 company-operated stores, including two in Mexico.
For fiscal 2024, the company anticipates 40 net new company-operated stores, excluding Mexico. It also expects to complete 40 co-located optimizations. Excluding Mexico, the company expects overall square footage growth in the low-double digits. Including Mexico, the overall square footage growth is expected to be in the low teens. The store openings in fiscal 2024 will include 10 stores in the Americas, including two company-operated stores to be opened in Mexico in the fiscal fourth quarter. The rest of the store openings in fiscal 2024 are expected to occur in the international markets, primarily in Mainland China.
LULU’s Other Financial Details
lululemon exited the quarter with cash and cash equivalents of $1.2 billion, $393.5 million capacity under its committed revolving credit facility and stockholders’ equity of $3.99 billion. Its inventories rose 8% year over year to $1.8 billion. Capital expenditure was $178 million in the fiscal third quarter.
In the fiscal third quarter, lululemon repurchased 1.58 million shares for $408.5 million at an average price of $259. Year to date, the company has repurchased shares worth $1.4 billion under its share buyback program. As of Dec. 5, 2024, it had $1.8 billion remaining under its current share repurchase authorization. This included the company’s additional share repurchase authorization of $1 billion, approved Tuesday.
What to Expect From lululemon Stock in Q4 & FY24?
Looking ahead, lululemon remains optimistic about its fiscal fourth-quarter performance, supported by a strong start to the holiday season. However, the company expressed caution in its outlook due to fewer shopping days between Thanksgiving and Christmas and ongoing macroeconomic uncertainty. The company raised its revenue and EPS forecast for fiscal 2024.
For the fourth quarter of fiscal 2024, management anticipates net revenues of $3.475-$3.51 billion, indicating 8-10% year-over-year growth and 3-4% growth excluding the 53rd week. This also includes an additional $20 million negative impact from adverse currency rates. The company expects the gross margin to contract 20-30 bps year over year, driven by deleverage on fixed costs and ongoing investment in store growth and the multi-year distribution center project. LULU expects the product margin to increase 60-70 bps year over year in the fiscal fourth quarter, including a 40 bps increase in freight costs and slightly improved markdowns.
SG&A, as a percentage of sales, is expected to increase by 90-100 basis points year over year, driven by higher foundational investments and associated depreciation, as well as strategic initiatives to enhance brand awareness and support future growth. The operating margin for the fiscal fourth quarter is expected to decline 110-130 bps year over year.
EPS for the fiscal fourth quarter is expected to be $5.56-$5.64, whereas it reported an adjusted EPS of $5.29 in the prior-year quarter. It estimates an effective tax rate of 29.5% for the fiscal fourth quarter.
The company expects dollar inventory to increase in the mid-teens in the fiscal fourth quarter.
For fiscal 2024, LULU anticipates net revenues of $10.452-$10.487 billion, suggesting 9% year-over-year growth and a 7% rise, excluding the 53rd week in 2024. Earlier, the company predicted revenue growth of $10.375-$10.475 billion for fiscal 2024, suggesting year-over-year growth of 8-9% and a 6-7% rise excluding the 53rd week. The company noted that its fiscal 2024 revenue guidance includes an additional impact of $20 million from adverse currency rates.
lululemon anticipates the gross margin to increase 10-20 bps year over year compared with a 20-bps decline projection earlier. The raised gross margin view reflects relatively flat markdowns compared to last year. The SG&A expense rate is expected to rise 20-30 bps year over year in fiscal 2024. LULU expects the fiscal 2024 operating margin to contract 10-20 bps year over year.
The company projects an EPS of $14.08-$14.16, suggesting an increase from the $12.77 reported in fiscal 2023. The revised guidance also reflects an improvement from the $13.95-$14.15 expected earlier. LULU anticipates an effective tax rate of 30% for fiscal 2024.
lululemon expects a capital expenditure of $670-$690 million for fiscal 2024. As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion.
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Gildan Activewear (GIL - Free Report) , Hanesbrands (HBI - Free Report) and Ralph Lauren (RL - Free Report) .
Gildan Activewear is a manufacturer and marketer of premium quality branded basic activewear for sale principally in the wholesale imprinted activewear segment of the North American apparel market. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and earnings indicates growth of 1.5% and 15.6%, respectively, from the year-ago period’s reported figure. GIL has a trailing four-quarter average earnings surprise of 5.4%.
Hanesbrands engages in the design, manufacture, sourcing and sale of apparel essentials for men, women and children in the U.S. and internationally. It has a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Hanesbrands’ current fiscal-year earnings indicates growth of 550% from the year-ago period’s reported figure. HBI has a trailing four-quarter average earnings surprise of 21.6%.
Ralph Lauren is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia, and internationally. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and EPS indicate growth of 3.5% and 13.6%, respectively, from the year-ago period’s reported figures. RL has a trailing four-quarter average earnings surprise of 9.1%.
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lululemon Shares Rally 9% on Q3 Earnings & Revenue Beat, Raised View
lululemon athletica inc. (LULU - Free Report) reported third-quarter fiscal 2024 results, wherein revenues and earnings beat the Zacks Consensus Estimate and improved year over year. The company’s top line improved year over year due to continued strength in the international business and improvement in the Americas.
lululemon’s fiscal third-quarter earnings per share (EPS) of $2.87 increased 13.4% year over year compared with adjusted EPS of $2.53 in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of $2.69.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The company remains on track with the Power of Three X2 growth plan. LULU outlined the guidance for the fiscal fourth quarter and raised its revenue and EPS guidance for fiscal 2024.
Shares of lululemon have rallied 9.2% in the after-hours trading session yesterday, following the strong third-quarter fiscal 2024 performance and a raised fiscal 2024 view. This Zacks Rank #3 (Hold) company has seen its shares rally 50.9% in the past three months compared with the textile apparel industry’s gain of 24.6%.
Image Source: Zacks Investment Research
LULU’s Q3 Earnings Overview
The Vancouver, Canada-based company’s quarterly revenues advanced 8.7% year over year to $2.397 billion and outpaced the Zacks Consensus Estimate of $2.355 billion. On a constant-dollar basis, net revenues improved 8% year over year in the fiscal third quarter. Net revenues grew 2% in the Americas on both reported and constant-dollar basis and 33% internationally (up 30% on a constant-dollar basis).
Total comparable sales (comps) rose 4% year over year and 3% on a constant-dollar basis. Comps in the Americas declined 2% year over year. Internationally, comps increased 25% and 22% on a constant-dollar basis.
In the store channel, the company’s total sales increased 13% in the fiscal third quarter. Digital revenues improved 4% year over year and contributed 39% to the total revenues.
The gross profit improved 9% year over year to $1.4 billion. Also, the gross margin expanded 40 basis points (bps) to 58.5%, led by a 50-bps rise in the product margin, flat markdowns, a 20-bps deleverage on fixed costs, and 10-bps positive impacts of foreign exchange.
Management also noted that gross margin growth in the quarter was ahead of its guidance of a 50-60 bps year-over-year decline. The increase relative to the company’s guidance was fueled by effective management of fixed expenses within the gross margin, improved IMU, reduced distribution center operating costs, and the timing of expenses for specific store real estate projects. We expected the gross margin to contract 50 bps year over year to 57.6% for the fiscal third quarter.
lululemon athletica Stock Price, Consensus and EPS Surprise
lululemon athletica inc. price-consensus-eps-surprise-chart | lululemon athletica inc. Quote
SG&A expenses of $909.8 million increased 8% from the year-ago quarter. SG&A expenses as a percentage of net revenues of 38% declined 20 bps from 38.2% in the prior-year quarter. The decline in SG&A expense rate was less than a dip of 40-50 bps anticipated by the company, mainly due to a 20-bps impact from foreign exchange.
Our model predicted SG&A expenses to rise 5.6% year over year for the fiscal third quarter, with a 50-bps decline in the SG&A expense rate to 37.7%.
The operating income rose 12.5% year over year to $490.7 million in the fiscal third quarter. The operating margin of 20.5% expanded 70 bps year over year. Our model predicted a 7.4% year-over-year increase in adjusted operating income. We estimated the operating margin to increase 10 bps year over year to 19.9%.
Snapshot of lululemon’s Store Plans
In the fiscal third quarter, LULU opened 28 company-operated stores. This included 14 company-operated stores from the acquisition of the Mexico operations. As of Oct. 27, 2024, LULU operated 749 stores.
For the fourth quarter of fiscal 2024, lululemon plans to open 18 company-operated stores, including two in Mexico.
For fiscal 2024, the company anticipates 40 net new company-operated stores, excluding Mexico. It also expects to complete 40 co-located optimizations. Excluding Mexico, the company expects overall square footage growth in the low-double digits. Including Mexico, the overall square footage growth is expected to be in the low teens. The store openings in fiscal 2024 will include 10 stores in the Americas, including two company-operated stores to be opened in Mexico in the fiscal fourth quarter. The rest of the store openings in fiscal 2024 are expected to occur in the international markets, primarily in Mainland China.
LULU’s Other Financial Details
lululemon exited the quarter with cash and cash equivalents of $1.2 billion, $393.5 million capacity under its committed revolving credit facility and stockholders’ equity of $3.99 billion. Its inventories rose 8% year over year to $1.8 billion. Capital expenditure was $178 million in the fiscal third quarter.
In the fiscal third quarter, lululemon repurchased 1.58 million shares for $408.5 million at an average price of $259. Year to date, the company has repurchased shares worth $1.4 billion under its share buyback program. As of Dec. 5, 2024, it had $1.8 billion remaining under its current share repurchase authorization. This included the company’s additional share repurchase authorization of $1 billion, approved Tuesday.
What to Expect From lululemon Stock in Q4 & FY24?
Looking ahead, lululemon remains optimistic about its fiscal fourth-quarter performance, supported by a strong start to the holiday season. However, the company expressed caution in its outlook due to fewer shopping days between Thanksgiving and Christmas and ongoing macroeconomic uncertainty. The company raised its revenue and EPS forecast for fiscal 2024.
For the fourth quarter of fiscal 2024, management anticipates net revenues of $3.475-$3.51 billion, indicating 8-10% year-over-year growth and 3-4% growth excluding the 53rd week. This also includes an additional $20 million negative impact from adverse currency rates. The company expects the gross margin to contract 20-30 bps year over year, driven by deleverage on fixed costs and ongoing investment in store growth and the multi-year distribution center project. LULU expects the product margin to increase 60-70 bps year over year in the fiscal fourth quarter, including a 40 bps increase in freight costs and slightly improved markdowns.
SG&A, as a percentage of sales, is expected to increase by 90-100 basis points year over year, driven by higher foundational investments and associated depreciation, as well as strategic initiatives to enhance brand awareness and support future growth. The operating margin for the fiscal fourth quarter is expected to decline 110-130 bps year over year.
EPS for the fiscal fourth quarter is expected to be $5.56-$5.64, whereas it reported an adjusted EPS of $5.29 in the prior-year quarter. It estimates an effective tax rate of 29.5% for the fiscal fourth quarter.
The company expects dollar inventory to increase in the mid-teens in the fiscal fourth quarter.
For fiscal 2024, LULU anticipates net revenues of $10.452-$10.487 billion, suggesting 9% year-over-year growth and a 7% rise, excluding the 53rd week in 2024. Earlier, the company predicted revenue growth of $10.375-$10.475 billion for fiscal 2024, suggesting year-over-year growth of 8-9% and a 6-7% rise excluding the 53rd week. The company noted that its fiscal 2024 revenue guidance includes an additional impact of $20 million from adverse currency rates.
lululemon anticipates the gross margin to increase 10-20 bps year over year compared with a 20-bps decline projection earlier. The raised gross margin view reflects relatively flat markdowns compared to last year. The SG&A expense rate is expected to rise 20-30 bps year over year in fiscal 2024. LULU expects the fiscal 2024 operating margin to contract 10-20 bps year over year.
The company projects an EPS of $14.08-$14.16, suggesting an increase from the $12.77 reported in fiscal 2023. The revised guidance also reflects an improvement from the $13.95-$14.15 expected earlier. LULU anticipates an effective tax rate of 30% for fiscal 2024.
lululemon expects a capital expenditure of $670-$690 million for fiscal 2024. As part of the Power of Three X2 growth plan, LULU estimates net revenues of $12.5 billion by 2026, implying significant growth from the 2021 reported figure of $6.25 billion.
Solid Picks in LULU’s Broader Industry
We have highlighted three better-ranked stocks from the same industry, namely Gildan Activewear (GIL - Free Report) , Hanesbrands (HBI - Free Report) and Ralph Lauren (RL - Free Report) .
Gildan Activewear is a manufacturer and marketer of premium quality branded basic activewear for sale principally in the wholesale imprinted activewear segment of the North American apparel market. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gildan Activewear’s current fiscal-year sales and earnings indicates growth of 1.5% and 15.6%, respectively, from the year-ago period’s reported figure. GIL has a trailing four-quarter average earnings surprise of 5.4%.
Hanesbrands engages in the design, manufacture, sourcing and sale of apparel essentials for men, women and children in the U.S. and internationally. It has a Zacks Rank #2 at present.
The Zacks Consensus Estimate for Hanesbrands’ current fiscal-year earnings indicates growth of 550% from the year-ago period’s reported figure. HBI has a trailing four-quarter average earnings surprise of 21.6%.
Ralph Lauren is a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia, and internationally. The company currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and EPS indicate growth of 3.5% and 13.6%, respectively, from the year-ago period’s reported figures. RL has a trailing four-quarter average earnings surprise of 9.1%.