Dive Brief:
- Setting itself apart from the rest of the industry, Lululemon’s total revenue for the second quarter increased 29% year-over-year to $1.9 billion stemming from increased store sales, according to a company press release Thursday. Direct-to-consumer revenue increased 30% to $775.4 million and accounted for 41.5% of total net revenue.
- The company’s inventories increased 85% year over year, but CEO Calvin McDonald said on an earnings call with analysts that this was not a concern because it is compared to when the company had too little inventory to meet demand. He also said that transactions for first-time guests increased 20% in the quarter.
- Lululemon’s customer base reacted well to new collections launched during the quarter, such as hike and footwear expansion, according to McDonald. The brand will expand its run, hike and footwear collections during the rest of the year, in addition to launching a two-tier membership benefits program for customers.
Dive Insight:
Lululemon is thriving in a tough retail environment, without increasing markdowns. The second quarter results follow last quarter’s success, where revenue was up 32%.
“We have been looking closely at our guest data and metrics to identify any shifts in spending patterns, behaviors or habits. And to date I am pleased to share that we are not seeing any meaningful variation in cohort behavior or the metrics we track in this area of the business,” McDonald said.
As traffic has increased across all channels of the business, McDonald noted that Lululemon is “not creating this traffic through markdowns or price promotions.” The company has not changed its promotional cadence or markdown strategy and does not have any plans to do so, according to McDonald.
The retailer also reported that women’s revenue has increased 25% on a 3-year compound annual growth rate basis, and men’s was up 30%.
In regards to the supply chain issues many retailers are still grappling with, McDonald noted that the company is monitoring these problems, but it has no closures with vendors at the moment. He also said production is ramping back up in China, ocean delivery times are improving and air freight rates are starting to go down.
Lululemon’s results are a stark contrast to the rest of the industry.
“Indeed, it is almost as if the company is on a different planet from the rest of retail,” said GlobalData’s Managing Director Neil Saunders in emailed comments.
Saunders said that while Lululemon is not immune to economic pressures, it has coped better since its consumer base tends to have higher incomes and it has refused to resort to increasing discounts.
“This makes it a clear pandemic winner … and one that looks set for further victories in the quarters ahead,” said Saunders.
