Lululemon (NASDAQ:LULU) Posts Q1 Sales In Line With Estimates, Stock Soars

Jabin Bastian /
2024/06/05 4:11 pm EDT

Athletic apparel retailer Lululemon (NASDAQ:LULU) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 10.4% year on year to $2.21 billion. On the other hand, next quarter's revenue guidance of $2.41 billion was less impressive, coming in 1.8% below analysts' estimates. It made a GAAP profit of $2.54 per share, improving from its profit of $2.28 per share in the same quarter last year.

Is now the time to buy Lululemon? Find out by accessing our full research report, it's free.

Lululemon (LULU) Q1 CY2024 Highlights:

  • Revenue: $2.21 billion vs analyst estimates of $2.20 billion (small beat)
  • Diluted EPS: $2.54 vs analyst estimates of $2.40 (5.8% beat)
  • Revenue Guidance for Q2 CY2024 is $2.41 billion at the midpoint, below analyst estimates of $2.45 billion
  • The company reconfirmed its revenue guidance for the full year of $10.75 billion at the midpoint
  • Gross Margin (GAAP): 57.7%, in line with the same quarter last year
  • Same-Store Sales rose 6% year on year (14% in the same quarter last year)
  • Market Capitalization: $38.63 billion

Calvin McDonald, Chief Executive Officer, stated: "In the first quarter, we saw strong momentum in our international markets, demonstrating how our brand continues to resonate around the world. Guests responded well to our product innovations across categories, and we are pleased by the progress we are making to optimize our U.S. product assortment. Looking ahead, we continue to have a significant runway for growth and are confident in our team’s ability to powerfully deliver for our guests in 2024 and beyond. "

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 23.5% over the last five years was incredible as it added more brick-and-mortar locations and increased sales at existing, established stores.

Lululemon Total Revenue

This quarter, Lululemon's year-on-year revenue growth clocked in at 10.4%, and its $2.21 billion in revenue was in line with Wall Street's estimates. The company is guiding for revenue to rise 9.1% year on year to $2.41 billion next quarter, slowing from the 18.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects sales to grow 11.7% over the next 12 months, an acceleration from this quarter.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefitting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.

Same-Store Sales

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 16% 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.

Lululemon Year On Year Same Store Sales Growth

In the latest quarter, Lululemon's same-store sales rose 6% year on year. By the company's standards, this growth was a meaningful deceleration from the 14% 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 Q1 Results

We enjoyed seeing Lululemon beat analysts' full-year earnings guidance expectations. We were also happy its revenue and EPS narrowly outperformed Wall Street's estimates as its same-store sales came in better than expected. Specifically, its same-store sales were driven by its impressive 29% growth in international markets, pointing to a potentially underappreciated opportunity.

Lululemon also announced a $1 billion increase to its share buyback program, bringing its total reserves to $1.7 billion. During the quarter, it repurchased $296.9 million worth of shares at an average purchase price of ~$371.

Overall, this was a good quarter for Lululemon. The stock is up 9.4% after reporting and currently trades at $337.14 per share.

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.