Lululemon results

Lululemon reported quarterly earnings that took the market by surprise. Their better-than-expected results boosted shares by 4%.

Before these numbers, the Lululemon stock had taken a hit, down over 40% this year, due to concerns about slowing growth in North America and the exit of Chief Product Officer Sun Choe. It's now down 'only' 37% for the year.

Lululemon reported a 7% year-over-year growth in comparable sales to $2.21 billion and an 11% jump in net income, both beating expectations.

Despite this, growth in the Americas region is a concern, with flat comparable sales. CEO Calvin McDonald blamed inventory issues, which he said should be fixed in the second half of the fiscal year.

Competition is also heating up with brands like Alo Yoga and Vuori, which have gained market share and opened stores near Lululemon locations. Together, these competitors have annual revenue representing 38% of Lululemon's size in the US market. Gap's Athleta is also growing again after a period of decline.

Lululemon still expects 12% revenue growth in 2024, driven mostly by international expansion. It has a strong operating margin of around 20%, thanks to a creative product mix focusing on items people love.

Lululemon remains a leader in high-end athleisure apparel. To maintain its premium valuation it needs to regain popularity and solidify its dominance in the US market under new creative leadership. Do they have what it takes? I think so.