Risk, returns & timeframes illustration
5 min read
September 5, 2023
by
Belinda Nash

Lululemon Athletica delivers a second quarter flex

Since they first stepped their lycra-clad yoga bods onto the Nasdaq, Lululemon has come a long way, now producing everything from tennis gear, golf clobber to …neon slides? Today Lululemon is nipping at the heels of sporting giants Nike and Adidas bringing a shoe game that delivers all the feels.
5 min read
September 5, 2023
by
Belinda Nash

Lululemon Athletica delivers a second quarter flex

Since they first stepped their lycra-clad yoga bods onto the Nasdaq, Lululemon has come a long way, now producing everything from tennis gear, golf clobber to …neon slides? Today Lululemon is nipping at the heels of sporting giants Nike and Adidas bringing a shoe game that delivers all the feels.
5 min read
September 5, 2023
by
Belinda Nash

Lululemon Athletica delivers a second quarter flex

Since they first stepped their lycra-clad yoga bods onto the Nasdaq, Lululemon has come a long way, now producing everything from tennis gear, golf clobber to …neon slides? Today Lululemon is nipping at the heels of sporting giants Nike and Adidas bringing a shoe game that delivers all the feels.
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Lockdowns may be in the rearview mirror, but are we still living our best life in athleisure wear? Lululemon Athletica’s (LULU) Q2 results last week delivered an earnings surprise of 5.93%, beating Wall Street estimates. Earnings were US$341.60, or US$2.68 earnings per share (EPS), which was ahead of the same quarter last year where earnings ran to US$289.52 million, or $2.26 EPS. 

Yet despite a lacklustre performance throughout the year, Lululemon has beaten analysts’ estimates for the past four consecutive earnings quarters, including posting revenue of US$2.21 billion in the quarter, surpassing analysts expectations of US$2.17 billion. Not much difference? That’s US$40 million, or one-third of Allbirds’ entire market cap

Second quarter highlights 📈

  • Lululemon’s North America sales increased 11% and gained US market share
  • The company’s China Sales lifted 61%, amounting to around 12% of Lululemon’s overall revenue

The company says their Q3 is ‘off to a solid start’, and it seems investors are onboard the Lulu Train:

  • Lululemon (LULU) stock year-to-date is up nearly 25%, and up nearly 28% since the same time last year, and the company has a market cap of US$51.147 billion 🧘♀️

The corporate sweat for brand exposure

With billions watching global sporting events like the FIFA Women’s World Cup, the recently wrapped World Athletics Championships, and with the Rugby World Cup kicking off in France this weekend, brands spend big bank hoping eyeballs are honed into their logos in sporting arenas.

Nike and Adidas dominated the field in the FIFA Women’s World Cup. 🏆 While Puma sponsors the Warriors, Adidas was an official partner of the FIFA Women’s World Cup. But on the field, it was Nike vs Adidas with Nike backing 13 teams, while Adidas backed 10 of the total of 32 team strips - although it was Adidas-backed Spain that took the win.

So how does Lululemon stack up? Largest sporting goods companies by market cap: 

  • Nike (NKE): the sponsor of Kiwi high jumper Hamish Kerr has a market cap US$156.60 billion
  • Lululemon (LULU): with the #lululemoncreator team repping their gear has a market cap of US$51.147 billion 
  • Adidas (ADDYY): the All Blacks sponsor’s market cap is US$35.713 billion 
  • On (ONON): sponsor of Kiwi George Beamish who came fifth in the men’s steeplechase at the World Athletics Championships holds a market cap US$9.294 billion
  • Puma (PUM.DE): the Warriors’ sponsor has a market cap of US$9.301 billion
  • Skechers (SKX): the partner of singer Ashley Park has a market cap of US$7.979 billion
  • ASICS (ASCCF): has a market cap of US$6.598 billion
  • Under Armour (UAA): the sportswear brand has a market cap of US$3.311 billion
  • Allbirds (BIRD): the Kiwi wool footwear brand has a market cap of US$119.024 million

Meanwhile, New Balance’s CEO Joe Preston told Yahoo Finance that ‘there’s no way’ the Boston-based company will IPO any time in the ‘near-future’. And Crocs (CROX) may have sports mode, but it’s a yeah-nah to joining this sportswear list. 

From Lycra to Lulu

Love at first Lycra. Lycra transformed how we move. 🤸‍♀️ From shapewear in 1958, to 1968 Winter Olympics alpine ski suits, to stream-lined fabrication breaking 1972 Olympics records in the pool and field, to the mass market explosion of activewear following Jane Fonda’s big hair energy aerobics flex, and, well, we’ve become stretchier. 

Then along came Lululemon. 🧎‍♀ Lycra’s story was just getting started when Canada’s yoga pant pioneer Lululemon stepped in to lead the Western yoga cultural revolution, launching their first blended nylon and Lycra yoga pants in 1998, and opening their first bricks ‘n’ mortar store in 2000. 

Within seven years, on 1 August 2007, Lululemon Athletica (LULU) listed on the Nasdaq, stretching their stock value over time, from US$17.03 up 2273% to today’s value of US$404.19. A day one investor who invested $US10,000 into Lululemon, stock priced at US$17.03 and buying and holding for the long term would have around US$260,767.74 today, with an annual average rate of return of 22.45%.

Running in step with Nike and Adidas 

Lululemon has become a major player in technical performance apparel with a slew of trademarked performance fabrics to support elite athletes. Along with workout wear, Lululemon Athletica makes tennis and golf clothing, sponsoring Lydia Ko - as well as a range of everyday clothing, accessories, coats, jackets, loungewear - even smart casual office wear with blazers. And this Father’s Day, dads may even have received a fleece bucket hat or ...neon slides?!

Tracing Allbirds’s footsteps or gearing up to outpace footwear giants? 👟 Lululemon’s cashing in on the post-pandemic running boom, bringing the ‘science of feeland stretchy mesh to your feet. And unlike more typical development of a woman’s shoe - which is building it for men’s feet and shrinking the design for women - Lululemon’s female workout shoe is based on the biometrics of the female foot.

Covid’s blip made room for tech innovation 

Let’s get virtual.  When stretchy pants became daily wear in 2020, Lululemon purchased interactive home gym start-up Mirror for US$500 million, a move that may have contributed to the company’s stock climbing to its November 2021 peak of US$473.00. Then, as gyms reopened, Lululemon ‘slashed’ their Mirror sales outlook for 2021 by more than half. 

PIVOT! But in October last year, the workout wear company launched Lululemon Studio, a fitness class member subscription using Mirror, with Lululemon CEO Calvin McDonald telling The New York Times he expects will comprise 5% of their sales ongoing. And keen shoppers can step into Lululemon’s virtual world anytime and feel those Lulu vibes. 🙌

Like this? 👍 Then you might like: How compounding growth and compound interest works

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Belinda Nash
Finance writer
Linkedin

We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.

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