Lululemon (LULU) earnings for the second quarter of 2023

A customer enters a Lululemon store on June 02, 2023 in Corte Madera, California.

Justin Sullivan | Getty Images

Lululemon raised its guidance for the full year on Thursday after it reported an 18% jump in both sales and profits for the second fiscal quarter, helped by a 61% rise in revenue in China.

The sportswear retailer now expects sales to be between $9.51 billion and $9.57 billion for the fiscal year, compared to a previous range of $9.44 billion to $9.51 billion.

Lululemon expects earnings to be in the range of $12.02 to $12.17 per share for the year, compared to a previous range of $11.74 to $11.94.

For the current quarter, the retailer expects earnings per share of $2.23 to $2.28 and sales of $2.17 billion to $2.19 billion, in line with analyst expectations, according to Refinitiv.

Here’s how Lululemon did it second fiscal quarter Compared to what Wall Street was expecting, based on a poll of analysts conducted by Refinitiv:

• Earnings per share: $2.68 For the expected $2.54
• he won: $2.21 billion Against the expected $2.17 billion

The company’s reported net income for the three-month period ending July 30 was $341.6 million, or $2.68 per share, compared to $289.5 million, or $2.26 per share, in the previous year.

Sales rose to $2.21 billion, up about 18% from $1.87 billion the previous year.

The strong growth at the international level was supported by the strong growth at the international level. Retail sales saw a 52% jump in sales in markets outside North America, supported by a 61% increase in China. This is up from the 30% growth in the region in the previous quarter.

Megan Frank, Lululemon’s chief financial officer, said there was little volatility in the region during the quarter. It described sales growth as “strong” and “healthy”, even as China’s economy slows, with retail sales rising just 2.5% year-on-year as of last July.

CEO Calvin McDonald said e-commerce and in-store sales were performing “incredibly well” in China.

The retailer now has 107 stores in the country, and of the 35 stores it plans to open globally during the current financial year, the majority will be in the region, MacDonald said.

Sales in North America increased by 11%. Meanwhile, same-store sales worldwide were below expectations: comparable sales rose 11% in the quarter, compared with estimates of 12.1%, according to StreetAccount.

Lululemon has implemented an ambitious growth plan — its “Power of Three x2” strategy — that calls for doubling sales to $12.5 billion by 2026 from 2021 revenue of $6.25 billion. To get there, the retailer has been expanding its brick-and-mortar business and doubling its men’s and direct-to-consumer revenues.

Sales in the men’s category rose 15% during the quarter, and the retailer opened 10 new stores on a net basis, including its first in Thailand. By the end of the quarter, it had 672 stores globally.

It is also working to address a persistent inventory glut, with levels steadily declining year-on-year. During the second quarter, inventories rose 14% to $1.7 billion, compared to $1.5 billion in the same quarter last year. Frank said strong sales helped move inventories, as well as lower air freight costs.

While turnover rates are still a little slower than historical levels, the company said it is in a good position with both the currency and the level of its inventories, she said.

Direct-to-consumer revenue rose 15% but was a smaller portion of Lululemon’s overall channel mix in the quarter. Direct-to-consumer sales represent 40% of Lululemon’s total sales, compared to 42% in the same period last year.

Lululemon’s gross margin was broadly in line with expectations at 58.8%, compared to the 58.5% expected by analysts, according to StreetAccount.

Read the full earnings release here.