Lululemon by the Numbers: Geography, Products, and Performance

Good Morning,

Welcome to another edition of ChartWiz, where we break down financial data into easy-to-digest insights. In today’s edition, we turn our focus to Lululemon, a leading brand in the athletic apparel industry. By analyzing their revenue segments by geography, product lines, unredeemed gift cards, total store counts, and more, we’ll uncover key insights into their growth strategy and market performance.

And with that, welcome to ChartWiz!

RECENT EARNINGS BREAKDOWN

Key Highlights for their July, 2024 Quarter

• Net revenue for the quarter ended July 28, 2024 was $2,371,078 thousand, showing a strong performance compared to the previous year.

• Net income increased to $392,922 thousand for Q2 2024.

• Company executed a share buyback program purchasing shares worth $589,456 thousand during the quarter.

• Net income increased to $714,343 from $632,008 compared to the same period last year.

• Significant repurchase of common stock with a total of $888,935 for the two quarters ended July 28, 2024.

• The company entered into an agreement to acquire the operations and retail locations in Mexico for $160 million.

• Net revenue increased 7% to $2.4 billion. On a constant dollar basis, net revenue increased 8%.

• Comparable sales increased 2%, or 3% on a constant dollar basis.

• China Mainland comparable sales increased 21%, or 23% on a constant dollar basis.

• Rest of World comparable sales increased 17%, or 20% on a constant dollar basis.

• Net revenue increased by $370.0 million, or 9%, to $4.6 billion for the first two quarters of 2024.

• Comparable sales increased 4%, or 5% on a constant dollar basis.

• Substantial income growth observed across key regions including China Mainland and Rest of World.

• Americas revenue grew due to $108.6 million increase from new or expanded company-operated stores and other channels.

• China Mainland revenue increased substantially with a 24% comparable sales growth and opening of 25 new stores.

• Rest of World region saw a 20% increase in comparable sales, with 9 new stores opened.

• The company experienced a net income increase primarily due to an increase in gross profit, partially offset by higher selling, general, and administrative expenses.

• Significant stock repurchases were made with 2.6 million shares repurchased in the first two quarters of 2024.

• The company's net revenue grew by 7% on a reported basis, with a stronger 34% reported growth in China Mainland for the second quarter.

• The company operated a total of 721 stores as of July 28, 2024.

• Inventory balance decreased by 14% compared to the previous year.

• Challenges related to inflationary pressures impacting transportation, wages, and raw material costs.

• Highly competitive market environment challenging the company with pricing pressures and lost market share.

• Increasing labor costs in South Asia and South East Asia could significantly increase production costs.

• Global or regional health events, like the COVID-19 pandemic, significantly impact financial conditions, supply chain, and store traffic.

• Changes in tariffs, including sanctions against the PRC, could adversely impact the business and increase sourcing costs.

• Changes in tax laws or unanticipated tax liabilities could unfavorably affect effective income tax rates and profitability.

• Fluctuations in foreign currency exchange rates have affected and may continue to affect the company's results of operations.

• The company has an existing stock repurchase program with no time limit and increased by $1.0 billion in May 2024.

• The company's operating segments' financial information was revised to focus on regional markets rather than selling channels.

• As of July 28, 2024, the remaining authorized value for share repurchases was $1.3 billion.

• Lululemon reported its net revenue by new operating segments.

• Net revenue increased by $370.0 million, or 9%, to $4.6 billion for the first two quarters of 2024.

• The company's board of directors approved additional stock repurchase programs, with a recent increase of $1.0 billion authorized on May 29, 2024.

• Potential impact of labor cost inflation and pressure from consumers to reduce product prices.

• The company's business operations could be harmed if suppliers and manufacturers do not comply with the Vendor Code of Ethics or applicable laws.

• Fluctuating costs of raw materials, including petroleum-based products, silver, and cotton, could increase the company's cost of goods sold.

• The company faces compliance challenges due to varying privacy and data protection laws across jurisdictions.

• Disruptions to technology systems could adversely affect e-commerce operations and customer interactions.

• Compliance with the Uyghur Forced Labor Prevention Act and similar legislation may lead to greater supply chain compliance costs and delays.

• Our international operations are compliant with various regulations, including the U.S. Foreign Corrupt Practices Act.

• The company is involved in litigation regarding intellectual property, could be impacted by successful infringement claims, and expects these occurrences to grow with market expansion.

COMPANY OPERATED STORES - BY REGION

The 'Company Operated Stores By Region' dataset reveals a steady upward trajectory, with notable expansions in the United States and China, demonstrating the company's strategic focus on these markets. Between 2017 and 2024, the U.S. saw a significant jump from 247 to 370 stores, while China's growth from 4 to 117 stores highlights its emergence as a key player. Meanwhile, regions like Canada and Australia maintain a moderate pace, whereas markets like Singapore and South Korea show promising growth. Europe exhibits a mixed bag with modest activity in Germany and France. The company seems to have mastered the delicate dance of global expansion, balancing aggressive entry into ripe markets while maintaining a watchful eye on developing regions. Such data suggests the company is set on a course of calculated international growth, positioning itself as a resilient entity ready to capitalize on diverse market potentials.

REVENUE BY CHANNEL

• 'Company Operated Stores' showed a steady growth until a significant slump in early 2020, likely due to pandemic challenges, but rebounded vigorously by 2023.

• 'ECommerce' data, though sparse, seems to deliberate on its emergent role in 2024, with a noteworthy value in January.

• 'Other' revenues enjoyed a steady climb, with occasional hiccups, but embraced dramatic spikes into 2023. Meanwhile, 'Direct To Consumer' exhibited robust growth during and post-pandemic, a testament to digital resilience.

Overall, the company appears to have maneuvered its revenue streams adeptly across channels, signaling a successful diversification strategy. However, with fluctuating trends, sustaining this growth poses both a challenge and an opportunity.

REVENUE BY PRODUCT CATEGORY

The 'Revenue by Product' dataset exhibits multi-faceted revenue trends from 2020 to 2024 across Women's, Men's, and Other Categories.

• Noteworthy is the robust growth in Women's Products, showcasing consistent climbs with defining surges in Q1 2023 and Q1 2024, reaching over $2 billion.

• Men's Products paralleled this ascent, albeit more modestly, cresting near $779 million in Q1 2024.

• Other Categories lagged behind initially but made a gallant leap by 2022, with noticeable upticks in Q1 2023.

Overall, this indicates positive consumer momentum, with a strong focus on women's offerings pushing revenue. Yet, diversifying growth across Men's and Other Categories could balance risk and unlock further potential. The message is clear: capitalize on current strengths in women's products while nurturing fledgling markets to ensure sustained prosperity.

UNREDEEMED GIFT CARD LIABILITY

Ah, the fluctuating world of unredeemed gift cards—a financial rollercoaster if ever there was one. Over the collected years, the trend reveals an interesting pattern of spikes and falls. Each year closes with a peak, highlighted magnificently by the colossal leap to $306,479,000 in January 2024. Meanwhile, troughs are evident around mid-year, albeit with a gradual upward crawl. Notable jumps occur in January, likely due to holiday gifting habits. For the company, these variations emphasize untapped revenue potential, alongside the need to encourage redemption and stabilize cash flow. Meeting these odd, mile-high peaks with year-round consistency could be the golden key to a well-fattened bottom line.

TOTAL STORE COUNT

The time-series data for 'Company Operated Stores' reveals an overall upward trajectory from 2017 to 2024, with the number of stores nearly doubling from 411 to 721. This steadily increasing trend showcases notable expansions, particularly between early 2019 and late 2023, with significant milestones around November 2022 and early 2023 as the count jumped markedly. The occasional dips, like the minor setback in early 2020, seem to be mere blips in an otherwise robust growth pattern. For the company, such persistent expansion bodes well for market dominance and long-term value creation, suggesting that this strategy of scaling up is resonating well with consumer demand and swirling in more revenue potential.

WORD FROM WIZ

That’s all we have for you in today’s edition of ChartWiz. If you found this valuable, please consider forwarding it to a friend.

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Have a fantastic week!

-Wiz

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