Lululemon (NASDAQ:LULU) Reports Sales Below Analyst Estimates In Q2 Earnings
Athletic apparel retailer Lululemon (NASDAQ:LULU) fell short of analysts’ expectations in Q2 CY2024, with revenue up 7.3% year on year to $2.37 billion. Next quarter’s revenue guidance of $2.35 billion also underwhelmed, coming in 2.4% below analysts’ estimates. It made a GAAP profit of $3.15 per share, improving from its profit of $2.68 per share in the same quarter last year.
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Lululemon (LULU) Q2 CY2024 Highlights:
- Revenue: $2.37 billion vs analyst estimates of $2.41 billion (1.5% miss)
- EPS: $3.15 vs analyst estimates of $2.92 (8% beat)
- The company dropped its revenue guidance for the full year to $10.43 billion at the midpoint from $10.75 billion, a 3% decrease
- EPS (GAAP) guidance for the full year lowered and is $14.05 at the midpoint, roughly in line with what analysts were expecting
- Gross Margin (GAAP): 59.6%, in line with the same quarter last year
- Locations: 721 at quarter end, up from 672 in the same quarter last year
- Same-Store Sales rose 2% year on year (11% in the same quarter last year)
- Market Capitalization: $32.35 billion
Calvin McDonald, Chief Executive Officer, stated: "In the second quarter, lululemon delivered revenue and earnings growth, with ongoing strength across our international business. In the U.S., our teams continue to optimize our product assortment and remain focused on driving forward our opportunities in the market. Looking ahead, we feel confident in the long runway in front of us as we execute on our Power of Three ×2 growth plan."
Originally serving yogis and hockey players, Lululemon (NASDAQ:LULU) is a designer, distributor, and retailer of athletic apparel for men and women.
Apparel Retailer
Apparel sales are not driven so much by personal needs but by seasons, trends, and innovation, and over the last few decades, the category has shifted meaningfully online. Retailers that once only had brick-and-mortar stores are responding with omnichannel presences. The online shopping experience continues to improve and retail foot traffic in places like shopping malls continues to stall, so the evolution of clothing sellers marches on.
Sales Growth
Lululemon is larger than most consumer retail companies and benefits from economies of scale, giving it an edge over its competitors.
As you can see below, the company’s annualized revenue growth rate of 22.8% over the last five years was incredible as it added more brick-and-mortar locations and increased sales at existing, established stores.
This quarter, Lululemon’s revenue grew 7.3% year on year to $2.37 billion, missing Wall Street’s expectations. The company is guiding for revenue to rise 6.7% year on year to $2.35 billion next quarter, slowing from the 18.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 10.4% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
Same-store sales growth is a key performance indicator used to measure organic growth and demand for retailers.
Lululemon’s demand has outpaced the broader consumer retail sector over the last eight quarters. On average, the company has grown its same-store sales by a robust 13.4% year on year. This performance gives it the confidence to rapidly expand its store count. When a company has strong demand, more locations should help it reach more customers seeking its products and boost revenue growth.
In the latest quarter, Lululemon’s same-store sales rose 2% year on year. By the company’s standards, this growth was a meaningful deceleration from the 11% year-on-year increase it posted 12 months ago. We’ll be watching Lululemon closely to see if it can reaccelerate growth.
Key Takeaways from Lululemon’s Q2 Results
Revenue missed, but gross margin exceeded expectations this quarter, setting up an EPS beat. On the other hand, its revenue guidance for next quarter was underwhelming, and the company lowered its full year revenue and EPS guidance. Overall, this was a weaker quarter. The stock remained flat at $259.84 immediately after reporting.
So should you invest in Lululemon right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
