Today Lululemon stock jumped 13%, thanks to strong earnings of last quarter, actual EPS is $4.40, beating the expectation of $4.26. In the 4th quarter, the total net revenue increased 30% to $2.8 billion, primarily due to increased direct to consumer net revenue as well as increased company-operated store net revenue, including from increased comparable store sales and new company-operated stores.
Lululemon ($LULU) has surpassed Adidas ($ADDYY), become second largest athletic apparel company in the world by market cap, just below Nike ($NKE).
Lululemon Athletica Inc. is a Canadian athletic apparel retailer that sells high-quality yoga and fitness clothing for women and men. The company has seen significant growth over the past few years, driven by its focus on innovation and product differentiation.
Bulls
Financial Performance: Lululemon’s financial performance has been strong in recent years. The company has seen consistent revenue growth, with revenue reaching $8.1 billion in fiscal year 2022, up from $3.3 billion in fiscal year 2016. The company’s net income has also been consistently positive, with net income of $975 million in fiscal year 2022.
Competitive Position: Lululemon operates in a highly competitive market, with other athletic apparel companies such as Nike, Adidas, and Under Armour competing for market share. However, Lululemon has managed to differentiate itself by focusing on high-quality, fashionable apparel that resonates with its target demographic. Lululemon is often credited with the development of “athleisure,” which we believe is a major change in how people dress and has increasingly broad appeal.
E-Commerce Growth: Lululemon has been investing heavily in its e-commerce capabilities, which has helped the company to expand its customer base beyond its brick-and-mortar stores. The company’s e-commerce sales grew by 46% in fiscal year 2022, compared to the previous year.
International Expansion: Lululemon has been expanding its presence internationally, with a particular focus on the Asian market. The company has opened new stores in China and Japan, and has plans to further expand in these markets. Lululemon has a big opportunity in greater China, where the firm operates just over 100 stores. China is the second-largest athletic apparel market in the world and has high growth.
Bears
Lululemon’s expansion into categories such as running and training, as well as its foray into footwear, puts it in direct competition with established athletic apparel companies such as Nike.
Despite this, Lululemon has only made one acquisition in its history, which was Mirror. However, the acquisition did not meet its sales projections. Lululemon is now attempting to integrate Mirror into its connected fitness strategy, but the success of this plan has yet to be proven.
Valuation: Lululemon’s stock is currently trading at a price-to-earnings ratio of around 35, which is higher than the industry average of around 15. However, the company’s strong financial performance and growth prospects may justify the higher valuation.
The Bottom Line
Overall, Lululemon has demonstrated strong financial performance and has a solid competitive position in the athletic apparel market. The company’s focus on e-commerce and international expansion also bodes well for future growth. However, investors should be mindful of the company’s relatively high valuation and intense competition in the global sportswear market.
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