Lululemon earnings: 'We're in the early innings of our our potential', says CEO

Lululemon (LULU) sales surged 24 per cent in its most recent fiscal quarter, topping analyst expectations as the company reported strong e-commerce and international sales growth.

“Our continued growth demonstrates our ability to win both before, during and after COVID-19,” chief executive Calvin McDonald said on a conference call with analysts on Tuesday, shortly after the company reported its fourth quarter earnings results.

“Our business has many strengths and growth opportunities. We are just in the early innings of our potential.”

The Vancouver-based company saw sales in the three-month period ending Jan. 31 hit $1.73 billion, an increase of 24 per cent compared to the same time last year. Lululemon reported a net income of $330 million, or $2.52 per diluted share, compared to $298 million, or $2.28 per diluted share, last year.

The sales increase in the fourth quarter caps a year that saw demand for Lululemon’s athletic apparel products surge, as the COVID-19 pandemic forced people to exercise, and work, from home. Sales in 2020 jumped 11 per cent compared to 2019, to $4.4 billion.

Lululemon expects the strong sales momentum to continue through 2021, with first quarter sales expected to be in between $1.1 billion and $1.13 billion. Analysts’ average estimate was $999.5 billion, according to data from Refinitiv.

The company said it will open more retail stores as it looks to build on its strong sales performance in a year that was defined by COVID-19 pandemic. McDonald said Tuesday that the company plans to open between 40 to 50 new Lululemon stores around the world by the end of the year. The company did not specify in which countries the new stores would be located.

Lululemon also will expand its offering through Mirror, the at-home fitness company it acquired for $500 million last June. McDonald said the company will add two additional production studios to offer three times the number of classes currently available by the end of the year. Mirror – which sells for $1,500 – is a high-tech mirror that doubles as an at-home fitness platform, featuring live and on-demand classes. Mirror will also be available for purchase at more than 200 Lululemon locations by the end of 2021.

“I don’t expect the pandemic tailwinds to disappear once mass vaccinations have occurred,” McDonald said.

“Guests were seeking more convenient at-home options before COVID-19 and they will continue to seek these options post-pandemic.”

Lululemon's stock was down nearly 2 per cent in after-market trading on Tuesday.

With files from Reuters

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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