Lululemon Athletica (NASDAQ:LULU) has reported a strong rise in third-quarter revenue and earnings as it progresses with its strategy of doubling its business over the five years to 2026.
However, while the technical athletic apparel, footwear, and accessories company said it was “pleased” was its performance as it enters the holiday season, fourth-quarter guidance fell shy of analysts’ expectations, sending its shares lower.
The company reported a 28% rise in 3Q net revenue to $1.9 billion from a year earlier, while gross profit increased by 25% to $1 billion and diluted earnings per share improved to $2.00 compared to $1.44 in 3Q 2021.
"In the third quarter, we continued to deliver strong and balanced results across the business, demonstrating the significant potential for our brand,” the company's CEO Calvin McDonald said in a statement.
Lululemon ended the third quarter with $353 million in cash and cash equivalents and the capacity under its committed revolving credit facility was $395 million.
For the fourth quarter, it said it expects net revenue to be in the range of $2.61 billion to $2.66 billion, representing a three-year compound annual growth rate of approximately 24%. Diluted earnings per share are expected to be in the range of $4.20 to $4.30 for the quarter.
Power of Three x2 growth plan
“Our ongoing momentum is a testament to our innovative products, deep community relationships, and the hard work and dedication of our talented teams around the world,” McDonald continued. “We are pleased with our early holiday season performance and look forward to all that’s ahead for lululemon as we continue to deliver on our Power of Three ×2 growth plan."
Lululemon’s Power of Three x2 growth plan calls for a doubling of the business from 2021 net revenue of $6.25 billion to $12.5 billion by 2026.
It said the key pillars of the plan are product innovation, guest experience, and market expansion and the growth strategy includes a plan to double men's, double direct to consumer, and quadruple international net revenue relative to 2021.
Lululemon’s shares traded 6.7% down in early Friday trade.
Contact the author at stephen.gunnion@proactiveinvestors.com