Lululemon Athletica Inc (NASDAQ:LULU) right now is a pretty similar story to Nike (NKE) in the big picture. Growth is going to take a hit, but it represents a branding story that can actually strengthen through the fire of this contraction due to a strong online business and undeniable brand loyalty that translates into premium pricing.
Another similarity between the LULU and NKE results has to do with a track record in China during the earliest stages of the COVID-19 outbreak. In each case, the companies learned to adapt quickly. And those lessons apparently – at least according to management – helped to prepare them for weathering the outbreak in the US and EU.
But we would also note that neither company really wants to go out on a limb and project a confident forward view on guidance. In truth, investors know that there really is no visibility right now for companies like these. LULU probably won’t suffer for that lack of outlook. No one can see the road in front of them through the fog, and investors are well acclimated to that idea already.
One bright point to focus on: LULU has one of the least seasonal collections of any apparel brand you will find. The huge advantage there (under these very unique circumstances) is that the inventory won’t go “bad” just because we move to summer or fall.
Lululemon Athletica Inc (NASDAQ:LULU) designs, distributes, and retails athletic apparel and accessories for women, men, and female youth. It operates through two segments, Company-Operated Stores and Direct to Consumer.
The company offers pants, shorts, tops, and jackets for healthy lifestyle and athletic activities, such as yoga, running, and training, as well as other sweaty pursuits; and athletic wear for female youth. It also provides fitness-related accessories.
The company sells its products through a chain of company-operated stores; outlets and warehouse sales; a network of wholesale accounts, such as yoga studios, health clubs, and fitness centers; temporary locations, including seasonal stores; and license and supply arrangements, as well as directly to consumer through mobile apps, and lululemon.com e-commerce site.
As of February 2, 2020, it operated 491 company-operated stores under the lululemon and ivivva brands in the United States, Canada, the People's Republic of China, Australia, the United Kingdom, Japan, New Zealand, Germany, South Korea, Singapore, France, Malaysia, Sweden, Ireland, the Netherlands, Norway, and Switzerland.
The stock has been acting well over recent days, up something like 13% in that time. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -15%.
Our LULU Earnings Summary:
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lululemon athletica beats by $0.03, beats on revs; not providing FY20 guidance (200.80 +7.18)
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Reports Q4 (Jan) earnings of $2.28 per share, $0.03 better than the S&P Capital IQ Consensus of $2.25; revenues rose 19.7% year/year to $1.40 bln vs the $1.38 bln S&P Capital IQ Consensus.
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Total comparable sales increased 20%. Comparable store sales +9%. Direct to consumer net revenue increased +41%.
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Co is not providing FY20 guidance due to virus impact.
Our LULU Conference Call, Analyst, and Research Notes:
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Virus Update: "In February 2020, we temporarily closed all of our retail locations in Mainland China. All but one of these locations have since reopened. In March 2020, we temporarily closed all of our retail locations in North America, Europe, Malaysia, New Zealand, and we temporarily closed our distribution center in Sumner, WA. These locations currently remain closed."
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In NA and Europe, stores have been closed since March 16; stores in New Zealand are closed, while Australia is operating on reduced hours.
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In China, all of its stores except location in Wuhan are open, with most operating on regular schedules.
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Says sales trend "changed dramatically" during the second week of March.
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Through then, NA comps remained strong and in-line with Q4 trends.
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Notes digital business has remained strong throughout.
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Did see "dramatic slowdown" in business in conjunction with store closures and expects this to have a negative impact on Q1 comps, margins, and EPS.
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Early learnings from China show that "business will bounce back"
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Says not yet back to pre-closing volumes, but says business is getting stronger week-by-week.
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Women's comps +12%, men's comps +39% and accessory comps +24%
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NA +19%, International +25%, and China +70%
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Gross margin increased 70 bps to 58%
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Remains committed to 2023 targets
