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What Drove Lululemon Athletica’s Top-Line Growth in 2Q16?

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Analyzing the key revenue drivers in 2Q16

Lululemon Athletica, which reported its second-quarter results on September 1, saw a 13.6% growth in its revenues between 2Q15 and 2Q16, to $514.5 million. This growth was driven by improved sales comps as well as an increase in square footage. However, the company faced currency headwinds, which reduced its top line by $5.3 million, or 1%.

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Comparing LULU’s top-line growth

Lululemon’s top-line performance has been better than that of most apparel players. VF (VFC), Gap (GPS), and PVH (PVH) reported top-line growth of 0.8%, -6%, and 2%, respectively, in their last reported quarters. However, Under Armour’s (UA) pace of sales growth has outshined the rest of the apparel industry. The company has seen an average top-line growth of around 30% over the last four quarters.

A look at comps and square footage

Comparable store sales increased by 3% during the quarter. On a constant-dollar basis, this increase was about 4%. Total comparable sales, which include comparable store sales and direct-to-consumer sales, increased 5% in constant currency terms.

While brick-and-mortar comps improved by 4%, e-commerce comps rose 7%. Square footage increased 14% YoY (year-over-year), driven by the addition of 43 new company-operated stores.

Which categories performed best?

The women’s wear and bra and tank categories reported yearly growth of 13% and 3%, respectively. The men’s category also remained strong and registered same-store sales growth in the mid-teens.

ETF investors seeking to add exposure to LULU could consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.51% of its portfolio in LULU. In the next part of this series, we’ll look at the company’s bottom line.

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