Dive Brief:

• Lululemon appears untouched by industrywide concerns about less spending from inflation-weary shoppers, reporting 28% revenue growth in the third quarter. 
• Revenue reached $1.9 billion as comps grew 22%, according to a company press release. Operating income was up by close to $100 million, while net income increased by almost $70 million.
• Lululemon sees full-year revenue hitting nearly $8 billion for 2022, with the fourth quarter expected to net around $2.6 billion. 

Dive Insight:

Coming off of a Black Friday that was Lululemon’s “biggest day ever” for both revenue and traffic, the athletics brand is trending toward strong annual growth and is outpacing its five-year growth expectations, CEO Calvin McDonald said on a call with analysts.

That’s thanks to a variety of factors, including Lululemon’s ability to drive growth in both its newer businesses (men’s, international and digital) and its more mature divisions (women’s and stores), Wedbush analyst Tom Nikic said in emailed comments.

“We continue to view [Lululemon] as one of the highest-quality names in our space,” Nikic said. “Brand momentum is extremely high, and they have multiple high-visibility growth opportunities with long runways (men, international, and optionality if footwear ends up working for them).”

As to footwear so far, McDonald said the company’s latest launch — the Strongfeel training shoe — is off to an encouraging start. The company entered footwear earlier this year and has now launched four separate styles, including a running shoe, a cross-training shoe and an “elevated slide.”

“As I’ve mentioned before, footwear is a test-and-learn category for us and it represents a small portion of the growth we anticipate over the next five years,” McDonald said Thursday. “This allows us to build into the potential at an appropriate pace as we learn and make adjustments.”

While Lululemon might not compete with some of the more prominent sneaker brands, GlobalData Managing Director Neil Saunders said in emailed comments that the company could still “carve out a significant business for itself” in the space. And that’s just one area where Lululemon has expanded this year. 2022 also saw the brand reach into tennis, golf and hiking.

“All of this underlines the fact that, despite its size, Lululemon still has plenty of headroom for expansion as it enters new categories and deepens the share of wallet it is taking from both existing and new shoppers,” Saunders said.

Added to the retailer’s success is the fact that it sees no need to discount its products, unlike others in the industry.

“Lululemon has not succumbed to the drug of discounting – mainly because it has educated its customers that, outside of a few exceptional occasions, they need to pay full price for garments,” Saunders said. “This has been extremely helpful to margins and protected profits at a time when most of retail is seeing real pressure on the bottom line.”