In the third quarter, the company posted strong comparable-sales growth in international markets and a decline in the Americas.
The shares rose 9.1% at 5.56pm in extended trading in New York. The stock has declined 33% so far this year through Thursday’s close, compared with a 27% gain for the S&P 500 Index.
Comparable sales grew 4% in the third quarter, breaking a string of three straight quarters in which growth had slowed. CEO Calvin McDonald is betting the company can reignite demand, in part by expanding its assortment and embracing baggier styles.
The company’s strategic plan targets annual revenue of US$12.5 billion by 2026, fueled by rapid international growth, expanded online sales and more products for men.
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“This was a very solid quarter for Lululemon,” Neil Saunders, managing director at GlobalData, wrote in a research note. “It is also one that delivers a dose of relief in that the deceleration in growth that has taken hold for the past three quarters has been reversed.”
Saunders added that the quarter “was not a particularly strong one for apparel in general, so Lululemon has bucked prevailing trends”.
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Lululemon’s US sales were flat in the third quarter, but McDonald told analysts on Thursday that the company has an opportunity to grow there by adding new products. Momentum is strong in all of the company’s international markets, he added.
Overall, revenue in the quarter ended Oct 27 rose 9% to US$2.4 billion, above estimates, while in China, sales rose 39%. Gross margin of 58.5% also surpassed expectations.
The company, which pioneered the athleisure category, has attracted a number of rivals which are now offering products such as yoga pants at lower prices.
Randal Konik, an analyst with Jefferies, wrote in a research note that growth may be harder to come by in the coming quarters while consumers remain squeezed by inflation.
“We expect the company’s US business to continue to underperform as macro pressures weigh on the consumer, competition continues to increase and fashion shifts further away from LULU’s core offering,” he wrote.
Chart: Bloomberg
