Lululemon Athletica Inc. (LULU) reported better-than-expected third-quarter earnings, sending its stock price up 10.5% in after-hours trading on Thursday. The company’s strong international growth helped offset a slight decline in its Americas business, reassuring investors who had been closely monitoring the activewear brand’s recent performance in the U.S. market.
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Lululemon’s Q3 net income surged 41.5% to $351.9 million, or $2.87 per diluted share, compared to $248.7 million, or $1.96 per share, in the same period last year. This exceeded Wall Street analysts’ projections of $2.72 per share, according to Yahoo Finance. Revenue for the quarter, which ended October 27, rose 8.7% to $2.4 billion, up from $2.2 billion a year earlier.
Strong International Performance Offsets Weakness in Americas
A key driver of Lululemon’s Q3 success was its robust international performance. Comparable sales in international markets jumped 25%, significantly mitigating a 2% decline in the Americas. While net sales in the U.S. remained flat, consistent with the second quarter, CEO Calvin McDonald expressed confidence in the company’s long-term growth prospects in the region.
During the quarter, Lululemon expanded its retail footprint by adding 28 new stores, including 14 acquired through the acquisition of its operations in Mexico. This brought the company’s total store count to 749. The Mexico acquisition, which closed on September 10, had a negligible impact on the quarter’s results.
Focusing on Newness and Innovation
Lululemon has been actively working to revitalize its U.S. business by introducing updated styles, colors, prints, and patterns. McDonald highlighted the company’s progress in increasing the penetration of seasonal newness and expressed optimism about the upcoming spring collection. He noted sequential improvement in the assortment’s newness in the latter half of the year.
“We continue to see significant potential for growth in the U.S.,” McDonald stated. “Our guest retention remains high, and we see an opportunity to drive higher revenue per guest, with more newness in the assortment.”
Positive Momentum Heading into the Holiday Season
Lululemon also reported a strong start to the holiday shopping season. The company experienced record-breaking visits to its shop app and e-commerce site on Black Friday. Unlike some competitors, Lululemon avoids storewide sale events, instead leveraging increased holiday traffic to clear out existing inventory. This strategy allows the brand to maintain its premium positioning while still capitalizing on the holiday shopping surge.
Conclusion: Continued Growth and Optimism for Lululemon
Lululemon’s Q3 results demonstrate the company’s resilience and ability to adapt to changing market dynamics. While challenges remain in the U.S. market, the company’s strong international growth and focus on product innovation position it well for continued success. The positive start to the holiday season further reinforces this optimistic outlook. Lululemon’s commitment to delivering high-quality products and experiences, coupled with its strategic initiatives, suggests a bright future for the activewear giant.
