Lululemon Athletica Inc (LULU  ) reported its third quarter results. Although it does not have the legacy of Nike (NKE  ), it got under the skin of millennials who are passionate about the concept of a healthy lifestyle that embodies physical, mental, and emotional wellbeing. Nike is a global giant, but Lululemon carved a nice niche for itself, mainly in the field of yoga and athleisure wear.

Lululemon's Third Quarter Highlights

For the quarter ended on October 29th, Lululemon reported that revenue rose 18.7% to $2.2 billion but net income slipped 2.6% to $248.7 million. Lululemon's business expanded by 12% in North America, while growing 49% in the rest of the world. During the reported quarter, Lululemon added a net of 14 new stores, with the total amounting to 686. Adjusted earnings per share amounted to $2.53, topping FactSet's consensus estimate of $2.28.

CEO Calvin McDonald revealed that the women's business grew 19% during the quarter due to new product launches, strength in bottoms and ongoing performance in key franchises. During the quarter, Lululemon signed a deal with its former foe Peloton Interactive Inc (PTON  ). As part of the five-year partnership with Peloton, Lululemon got to ditch its Mirror home workout device as well as end producing its Fitness classes as Peloton streaming classes will be available in its studio. The ditching of Mirror resulted in post-tax asset impairment and other charges of $72.1 million.

Lululemon Has More Work To Do In The Men's Department

During the quarter, the men's category grew 15 % which is on par with the growth rate experienced during the pandemic. But, Lululemon will be launching men's footwear in the first quarter of next year.

A Lifted Outlook

For the full year, Lululemon lifted its profit guidance from its August projection that was in the range between $12.02 and $12.17. It now guided for adjusted EPS in the range between $12.34 and $12.42. Lululemon also lifted its revenue guidance with sales expected to grow about 18% to a range between $9.55 billion and $9.58 billion.

The Lululemon Brand Needs To Prove Its Endurance

For now, Nike has a more diverse product range, but Lululemon is expanding. Nike gets most of its revenue from footwear, but Lululemon is coming after that category as well. Although Lululemon currently mainly serves women, it is going into the men's segment. All in all, Nike and Lululemon both sell high-quality sports products. It's just that the enduring dominance that Nike showed makes it almost protected from going out of fashion. But Lululemon did build a strong brand, but only time will tell if its brand value is sustainable.

As for its union for Peloton, although a good idea for the two companies to focus on their core competencies, the deal has yet to yield results. Although Lululemon's financials took a short-term hit due its shutdown of its Mirror business, Lululemon is pushing ahead as it posted revenue growth and topped earnings estimates.

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