23 May 2023
|Index / Fund / Rate||Start of Year||Last week||This Week||% change YTD|
|Lunar BCI WW Flexible Fund||141.43||169.40||170.95||20.87%|
|JSE ALSI||73 049||76 590||77 126||5.58%|
|NASDAQ Composite||10 467||12 976||13 241||26.50%|
|S&P 500||3 840||4 205||4 282||11.52%|
|Prime Lending Rate||10,50%||11.75%||11.75%||11.90%|
|Brent Crude ($’barrel)||85,95||76.10||76.24||-11.30%|
Weekly Stocktake with Danyaal
From Downward Dog to Upward Profits, Lululemon’s revenue surges!
Yoga-pants, women’s running shoes, and increasing margins. Lululemon, the high-end athleisure designer brand held by Lunar Capital, recently unveiled their Q1 2023 financial results. The company recorded a 24% increase in revenue compared to the same quarter in the previous year, reaching $2 billion for the quarter. In addition, Lululemon experienced a surge in its net income, which increased by 52% to $290 million. The company’s performance can be attributed to several factors. Firstly, the revival of the Chinese market following the lifting of lockdown restrictions this year contributed to Lululemon’s increased revenue and net income. Furthermore, the company benefited from reduced airfreight costs this quarter compared to the same period last year, which resulted in their cost of sales decreasing.
Lululemon operates via physical stores as well as well as through on-line stores. Approximately 42% of sales is via direct channels, i.e. on-line. They currently have a total of 662 stores worldwide, with three key locations accounting for 82% of their store presence:
- The United States with 357 Lululemon stores,
- China with 119 stores, and
- Canada with 69 stores.
Sales breakdown from the various regions in this quarter is as follows:
- The USA with $1 315 million;
- Canada with $253 million, and
- China with $249 million in sales.
Lululemon’s strategy has 3 pillars: Product innovation, guest experience and market expansion.
On product innovation, Lululemon’s Align yoga pants are highly sought after by yogis, as its fit allows them to feel free and light while they practice. The Align pants alone generates over a billion dollars in sales per year. Whilst yoga wear was Lululemon’s original product focus, they now have products covering many other sports codes, and these also include shoes and accessories.
Lululemon operates within a fiercely competitive landscape, facing competition not only from other athleisure brands but also from established luxury brands like Luis Vuitton (owned by LVMH.) It is worth noting that athleisure and luxury brands often rely on public personalities to promote their products. However, this strategy can sometimes lead to adverse effects if the public figure faces criticism for their actions or statements. A prime illustration of such collateral damage can be seen in the case of Adidas and Kanye West, where negative associations with the Kanye West impacted Adidas’s reputation. Lululemon use product ambassadors and influencers in their marketing efforts too.
Lululemon is held in the Lunar BCI Worldwide Flexible Fund and by Lunar Capital’s Offshore Portfolio Management clients. And LVMH is held by Lunar Capital’s Offshore Portfolio Management clients.
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