Lululemon Athletica Stock Falls Despite 2Q16 Earnings Beat
Revenue trends for Lululemon in 2Q16
Lululemon Athletica (LULU) reported sales of $453 million in 2Q16, up 15.9% year-over-year. Excluding the impact of adverse foreign currency movements, sales would have increased by 21%. Reported sales beat consensus Wall Street analyst estimates of $445.6 million by 1.6%.
About 75% of Lululemon Athletica’s (LULU) sales of $453 million in 2Q16 came through sales from company-owned stores. Direct-to-consumer (or DTC) sales, consisting mostly of sales made over the company’s websites, came in at ~$82 million and accounted for 18.2% of the retailer’s revenue.
Revenue boosters
E-commerce was a major driver for Lululemon in the quarter. The company grew DTC sales 29.5% year-over-year in reported terms to $82 million. DTC now represents 18.2% of the total turnover for LULU versus 16.2% of sales clocked in 2Q14.
LULUicontinued to see traction in its pants and tank tops in 2Q16. Sales for both the men’s and ivivva businesses continued to grow faster than the overall company growth rate, according to Laurent Potdevin, LULU’s chief executive officer.
Peer performance
Under Armour (UA), a major competitor for LULU apparel, reported a 28.5% increase in sales in the quarter ended June 30, 2015. However, the appreciating US dollar took a greater toll on results for peers Nike (NKE) and VF Corporation (VFC). Reported revenue rose just 4.8% and 4.7%, respectively, for Nike and VFC in their respective last quarters.
LULU derived about 30% of its sales from markets outside the United States compared to the following peers. Company figures pertain to the respective last fiscal years.
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Nike – ~55%
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VF Corporation – ~38%
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Under Armour – ~11%
Nike (NKE), VF Corporation (VFC), and Under Armour (UA) together constitute 5.2% of the portfolio holdings in the Consumer Discretionary Select Sector SPDR ETF (XLY).
The next article discusses LULU’s same-store sales performance, a critical metric for measuring retailers’ revenue trends.
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