Lululemon reports £67.14 of net income in the fiscal second quarter

A sign for a Lululemon retail shop is reflected in the store's window at a shopping mall in San Diego

Lululemon on Tuesday reported surprise revenue growth, despite lockdowns during the height of the coronavirus pandemic, as stores started reopening in the fiscal second quarter and consumers stocked up on workout apparel and yoga accessories. It said nearly all, 97%, of its stores globally have reopened to date and store sales are averaging about 75% of their levels a year ago.

On an unadjusted basis, Lululemon's net income shrank during the second quarter to $86.8 million, or 66 cents a share, from $125 million, or 96 cents a share, a year earlier.

But sales at company-operated stores dropped 51% from the same quarter past year to $287.2 million, while Lululemon's second-quarter gross margin decreased 0.8 percentage points, to 54.2%.

Experts, on the other hand, had forecast the company to print a lower £653.5 million in the second quarter on 43.32 pence of earnings per share, as per FactSet. Product margin was flat year-over-year, inclusive of LULU's online warehouse sale, as lower production costs and product mix offset higher markdowns.

Lululemon said it was preparing for a number of scenarios and pulled forward its investments in the digital channel as the busy holiday season approaches.

SG&A expenses were approximately $353 million, or 39.1 percent of net revenue in Q2, compared to 36 percent of net revenue in the year-ago quarter. The company will focus on leveraging its omni-model and digital strength while continuing to invest in its digital channel to maximize its second half and holiday business. The company's second quarter 2020 earnings results, which were reported on Tuesday, were better than analysts' projections. Lululemon operated just over 50 seasonal stores in Q2 and plans to increase to approximately 70 in the second half of the year.

Lululemon ended the quarter with 506 stores. MIRROR is expected to be modestly dilutive to earnings this year. Adjusted EPS was $0.74. It also plans to open roughly 70 holiday pop-up shops, up from 51 previous year. "In our digital channel, we expect revenue to remain strong and well above our pre-COVID-19 growth rates of 30 percent to 40 percent but moderate in the second half relative to Q2 with the majority of stores open".

Revenues are expected to grow sequentially for the remainder of the year. MIRROR is estimated to generate in excess of $150 million in revenue for the full year of 2020.



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