Lululemon Continues Its Solid Growth Spree in 3Q17

Analyzing Lululemon’s 3Q17 top line

Lululemon Athletica (LULU) reported 3Q results on December 6. The company recorded a 13.7% YoY (year-over-year) increase in its top line to $619 million. It did better than the Wall Street expectations of a 12% rise in sales to $610 million and the management’s guidance range of $605 to $615 million in total sales. The company also outperformed Wall Street and the management’s guidance in the first two quarters of this year.

“Our teams powerfully delivered robust results across both store and digital channels this quarter, driving a further acceleration in our business. The strength of our Q3 earnings supports our unique position as the global brand defining an active, mindful lifestyle,” said Laurent Potdevin, CEO of Lululemon Athletica.

Lululemon Continues Its Solid Growth Spree in 3Q17

Competitor Under Armour (UAA), which reported third quarter results on October 31, posted a 4.5% decline to $1.4 billion, missing the consensus by $80 million.

What drove Lululemon’s 3Q17 sales?

3Q17 growth was driven by 8% growth in comparable store sales and a 12% increase in square footage (excluding ivivva stores). Analysts, on average, were expecting a 5.3% jump in comps.

Online sales continued to show strength as comps grew 25% during the quarter. This growth was anchored by a double-digit increase in traffic as well as transactions. The company also recorded its best digital conversions for the year.

LULU opened 46 net new stores over the last one-year period, including 26 stores in the US, four in Canada, ten in Asia, and three in Europe.

Foreign currency negatively impacted the top line by $6.8 million, while hurricanes decreased the revenue by ~$2.5 million. To know about the key revenue drivers for 3Q17, read the next section.

ETF investors seeking to add exposure to Lululemon Athletica can consider the iShares Morningstar Mid-Cap Growth ETF (JKH), which invests 0.4% of its portfolio in LULU.