Lululemon (NYSE: LULU) shares dropped about 2% following the company's fiscal Q3 earnings report which topped expectations in most categories and had the company raising its outlook. One factor in the stock price's weakness is that there's been a risk-off mood around most growth stocks. Another is that the company lowered its outlook for sales of its in-home fitness device, Mirror.
Overall, Lululemon shares are down just under 20% from their all-time highs set in mid-November. On a YTD basis, Lululemon's stock price is up 17%.
Inside the Numbers
In its fiscal Q3, Lululemon reported $1.62 per share in earnings, beating expectations of $1.41 per share. Revenue also came in slightly higher than expectations at $1.45 billion vs expectations of $1.41 billion.
One impressive stat from Lululemon's earnings report is that the company had same-store sales growth of 38%. Direct to consumer e-commerce sales were up 21% which is also notable given that last year there was 93% growth during the pandemic.
Sales of women's apparel were up 24%, while men's sales were up 29%. International expansion also continues to go well with the company expecting to open around 40 to 45 international stores.
The company also noted that its sales could have been higher if supply chain issues didn't affect inventories. The company also increased its inventory by a bigger than normal amount for the holiday season due to these factors. It also believes that these supply chain issues are getting better but some impact will linger in the second half of the year.
The company's recent growth initiatives into men's apparel and international markets have paid off. However, the company is preparing its next initiative by launching its footwear brand in the spring of next year.
Its last growth initiative - Mirror - is still inconclusive on whether or not it will pay off. The company did not have some issues that have affected its peers like Peloton (NASDAQ: PTON). These include higher customer acquisition costs and less interest in in-home fitness following the pandemic being over. It's also guiding down revenue between $125 million and $130 million from between $250 million and $300 million previously.
Despite this miss, the company was still able to increase its full-year revenue to $6.25 billion and $6.29 billion from its previous range of $6.19 billion and $6.25 billion. It also was able to increase its gross margins despite facing higher costs and supply chain challenges.