In this edition of the Glossy+ Research Briefing, we analyze Lululemon’s first-quarter financial results, which the company reported yesterday. Investors are relieved to see sunnier predictions for the rest of the year.
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Lululemon narrowly met earnings expectations for Q1 2024
Current state of the company: Lululemon rode the athleisure boom during the pandemic but has since seen momentum waiver. The company reported a softening in U.S. sales during its fourth-quarter 2023 earnings call, and leadership predicted milder growth for 2024. Since that time, Lululemon shares have been down, according to an analyst at Benzinga, a financial news company for investors.
Earlier this year, controversial comments from Lululemon’s founder Chip Wilson came to light in which he criticized the company’s diversity and inclusion efforts. “I think through this whole diversity and inclusion thing that they have become — trying to become like the Gap, everything to everybody,” said Wilson in an interview with Forbes. “You’ve got to be clear that you don’t want certain customers coming in.” A spokesperson for the company publicly reiterated after Wilson’s remarks that the founder had had no involvement in the company since his resignation in 2015 and the company was proud of the progress it had made to be more inclusive.
Last month was turbulent at the brand’s headquarters. Lululemon updated its operational structure after chief product officer Sun Choe resigned to join Vans. Instead of filling Choe’s position, Lululemon announced that global creative director Jonathan Cheung would “drive the product design and innovation roadmap” for Lululemon going forward. The company also named a new team of leaders to head merchandising and branding.
Canada’s Competition Bureau, an independent law enforcement agency, also opened an investigation into the Vancouver-based brand in May after climate-advocacy group Stand.earth filed a complaint about Lululemon’s “Be Planet” marketing campaign. Stand.earth alleged the campaign’s messaging was misleading and conflicted with Lululemon’s own 2022 Impact Report that indicated that the company had actually doubled its greenhouse gas emissions since the campaign’s launch..
Next month, Lululemon will dress the Olympic and Paralympic athletes at this year’s Summer Olympics in Paris. As the official outfitter of Team Canada, Lululemon will dress the athletes for the opening and closing ceremonies, medal ceremonies and their media appearances. Lululemon released a Team Canada x Lululemon Collection with 41 items for sale through the brand’s site, but the items are only available in Canada.
Earnings analysis: Considering the financial upswing mass-market brands like Macy’s and Gap, Inc. experienced in the first quarter of 2024 and the internal struggles Lululemon has faced this year, financial analysts predicted that Lululemon could continue to beat market expectations in first-quarter 2024, but by mild margins. Investors were concerned competition in the athleisure category from brands like Alo and Vuori would slow down sales for Lululemon, but they also believed that recent product launches like an expanded footwear line and a new sports bra collection could bring in more sales traffic.
The results were just that. Lululemon’s first quarter revenue of $2.21 billion came in just above Wall Street’s estimates of $2.20 billion, and earnings per share came in at $2.54 above the estimated $2.38. Lululemon has sunnier expectations for the rest of the year, forecasting a 9% to 10% increase in net revenue for the second quarter of 2024 and an 11% to 12% increase in net revenue for the full year.
