Lululemon Continues to Outperform

The ath-leisure brand passed its $1 billion revenues goal a year ahead of schedule.

Lululemon is still stretching the limits in the world of ath-leisure.

The apparel, accessories and footwear company, known for its luxury yoga pants, improved on both top and bottom lines last quarter, marking the eighth consecutive quarter of earnings growth.

For the fourth quarter 2018, or the period ending Feb. 3, revenues jumped to $1.16 billion, up from $928 million during the same period last year. That’s a 26 percent increase. Profits also increased to $218.4 million, compared with $119.7 million last year.

The stock, which closed up 2.26 percent to $146.80 a share on Wednesday before the results were announced, is up nearly 65 percent year-over-year, and continued to rise during after-hours trading by more than 13 percent.

“Lululemon has delivered one of its strongest years yet, a result of broad-based strength across the business,” chief executive officer Calvin McDonald said in a statement. “We are energized to build upon our momentum and to seize the many opportunities ahead for Lululemon around the world.”

McDonald added on the conference call Wednesday evening that Lululemon — which generates nearly 90 percent of sales in North America — will continue to expand internationally in markets like Japan, China, France and Germany, as the brand works to help consumers “live the sweat life.”

Earlier this month, Lululemon opened its first store in Amsterdam. The company will also open between 40 and 50 stores in the coming year, including about 20 to 30 abroad.

In addition to a stellar quarter, the results mean Lululemon has reached its $1 billion in sales goal ahead of its 2020 deadline.

But in the race to dress America, with its continually casual-leaning fashion sense, the news is not surprising. Goldman Sachs and Target Corp. have both recently relaxed their dress code policies. Traders were allowed to wear jeans on the floor of the New York Stock Exchange earlier this month during Levi Strauss’ return to the public market.

Activewear, which includes athletic and athletic-inspired apparel and footwear, is growing, according to market research firm Euromonitor International. The firm anticipates that the global activewear market will be worth roughly $413 billion by 2023.

McDonald told analysts on the conference call that Lululemon bottoms, both in the women’s and men’s business, was the strongest categories throughout 2018. Self-care, run and cold weather are other segments poised for growth in 2019.

“It always starts with great product and investments,” McDonald said.

Lululemon’s secret however, might be in its collaborations. Last quarter, executivessaid the company was trying to expand internationally and in its men’s wear line. During New York Fashion Week Men’s in February, Robert Geller unveiled a men’s wear collaboration with the brand. Lululemon also released a highly successful Lululemon x SoulCycle collaboration in February.

Despite the rapid success, Barclays’ Matthew McClintock said the company has even more room to grow.

“We remain aggressive buyers of the Lulu story, which we believe has a significantly larger [total addressable market] than even the most optimistic estimates likely expect,” the analyst wrote in a recent note. “We continue to believe Lulu’s [total addressable market] is ever-expanding as the company has entered into men’s in a meaningful way, has seen success in office, travel, commute offerings and continues to see a significant amount of opportunity in bras and outerwear.…Although Lululemon trades at a premium compared to the rest of our footwear and apparel universe, we believe this premium is warranted due to its high growth profile, and best-in-class brand image, operations and execution.”

Lululemon will have an investor day on April 24 in New York.

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