Lululemon Athletica reported stronger-than-expected earnings and revenue for its third quarter, benefiting from robust international sales that helped counter slower growth in its largest market, the US.
The company also raised its full-year revenue and earnings projections, bolstered by strong performance abroad, particularly in China.
For the fiscal third quarter ending October 27, Lululemon reported earnings per share (EPS) of $2.87, surpassing analyst expectations of $2.69. Revenue rose 9% year-over-year to $2.40 billion, exceeding the forecast of $2.36 billion. Net income for the period was $352 million, compared to $249 million a year earlier.
Despite the challenges in its home market, Lululemon’s performance was driven by a 33% increase in international sales, with China showing notable strength. Meanwhile, revenue from the Americas grew by just 2%, highlighting the company’s reliance on overseas markets for growth.
Looking ahead to the critical holiday shopping season, Lululemon forecasted revenue between $3.48 billion and $3.51 billion for the fourth quarter, which would represent 8-10% year-over-year growth. This guidance is in line with analysts’ expectations of $3.50 billion in revenue.
The company also expects EPS for the quarter to range from $5.56 to $5.64, slightly above the consensus estimate of $5.59. For the full fiscal year, Lululemon has adjusted its revenue guidance upward to a range of $10.45 billion to $10.49 billion, compared to its previous forecast of $10.38 billion to $10.48 billion. EPS for the full year is now projected between $14.08 and $14.16, ahead of the $13.97 analysts had expected.
While Lululemon’s international business has thrived, the company has faced challenges in its domestic market, including a 2% drop in comparable sales in the US The company’s strategy of introducing fresh product colors and styles has helped mitigate some of these issues, with analysts noting improvements in the appeal of its women’s range.
In addition to its product strategy, Lululemon has been working to improve efficiency, with CEO Calvin McDonald emphasizing that the company is being “thoughtful” in planning for the remainder of the holiday season. The company has also faced increased competition from both legacy brands like Nike and newer entrants like Vuori and Alo Yoga.
In response to investor concerns, Lululemon has focused on enhancing shareholder value, approving a $1 billion increase to its stock repurchase program. Shares of Lululemon rose about 8% in after-hours trading on Thursday, reflecting investor optimism following the company’s earnings report.
CNBC, Reuters, and Market Watch contributed to this report.
