Analyzing the key revenue drivers in fiscal 3Q16
As we discussed in Part 1 of this series, Lululemon Athletica (LULU) reported its fiscal 3Q16 results[1. quarter ended October 30, 2016] on December 7, 2016. Lululemon’s fiscal 3Q16 top line increased 13% YoY (year-over-year) to $544 million. In comparison, Wall Street expected a 12.7% rise to $541 million. The company has missed its consensus forecasts only twice in the last 12 quarters.
Apparel retailers Gap (GPS) and PVH Corp. (PVH), which reported their quarterly results in November, also delivered top line beats. While total sales of PVH Corp. increased 3.7% YoY, Gap reported a decline of 1.6% YoY. Ralph Lauren (RL), however, missed the consensus and reported a 10.2% YoY fall in its top line.
What drove Lululemon’s fiscal 3Q16 top line?
Lululemon’s revenue growth in fiscal 3Q16 was driven by 7% growth in sales comps versus 5.4% predicted by consensus, as well as an 11% increase in square footage compared to fiscal 3Q15. Although the brick-and-mortar comps improved 4%, the e-commerce comps stole the show with a 16% increase.
Which categories performed best?
Lululemon’s (LULU) Men’s and Women’s segments performed well in fiscal 3Q16. In the Women’s category, Top and Bottom Wear recorded mid-single-digit comp growth. The Bra business continued its strong momentum, growing 20% YoY during the quarter.
LULU’s Men’s category also remained strong and registered comp growth in the mid-teens once again. As in the first half of the year, growth in fiscal 3Q16 was driven by ABC Pants and Metal Vent.
ETF investors seeking to add exposure to LULU can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.43% of its portfolio in LULU.
Move on to the next section to see how LULU’s bottom line performed.