May 25, 2022


Skillful Business Crafters

The Market Loves Lululemon Stock After Earnings

Could the introduction of a footwear collection be the next key growth driver for Lululemon ( LULU -1.08% )? In this clip from “3 Minute Stocks Updates” on Motley Fool Live, recorded on March 30, Motley Fool contributor Rachel Warren discusses the retailer’s financials and key takeaways from its earnings report.

Rachel Warren: Shares are down slightly year-to-date, which isn’t really all that surprising given the trends we’ve been seeing in the market. Lululemon actually just released its full-year earnings report from 2021 yesterday. When I checked earlier today, the stock was trading up about 10%, so the market was responding quite well to that earnings report. Just a few key highlights that I wanted to hit upon. For the full-year, 2021, net revenue was up 42% year-over-year to $6.3 billion. Now, direct-to-consumer net revenue, that encompasses both online and in-app orders, was up 22% year-over-year. This number blew me away. Company-operated store net revenue increased 70% year-over-year compared to those e-commerce revenues which were up 22% year-over-year. To me, this signals not necessarily the death of e-commerce by any means. I have a lot of faith in that long-term growth trajectory but I do think it shows that more people are going back to shop in person. People miss that aspect of that in-person shopping experience. Net revenue is growing across all regions really well. That was up 40% in North America in 2021, 53% internationally. Those direct-to-consumer net revenues, those e-commerce revenues; that represented 44% of Lululemon’s total net revenue compared to 52% for 2020. Again, we’re seeing a little bit of a shift to perhaps consumers going back and buying those items in-store. Gross profits were up 46% year-over-year. The company’s operating margin increased 270 basis points. One of the things I like about Lululemon, they have a lot of cash on hand. They ended 2021 with $1.3 billion in cash and cash equivalents. They’re forecasting a strong quarter of growth in their first quarter of fiscal 2022. They’re targeting net revenue in the range of $1.53 billion to $1.55 billion. That would indicate growth of up to 26% year-over-year. A couple of things to note, finally, the company opened 53 net new company-operated stores during 2021. One thing I was searching for high and low was revenue from its Mirror acquisition. The only place I found it mentioned was in other revenue, which includes, not only Mirror, but also revenue derived from other outlets, temporary locations. In the fourth-quarter of 2021, that comprised just 9.3% of its total revenue. That is still not a key growth driver for the company, but that could be something that they can tap into further in the years ahead. Lululemon just announced its first ever footwear collection. That’s, again, another product line that they’re releasing and hoping to experience a lot of growth from. A lot of good things happening for the company. Really solid full-year report.

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