Making Lululemon-ade

Making Lululemon-ade

Last week, Lululemon, the Vancouver based athleisure company, released their Q4 2023 results. The yearly revenue increased by 18.5% to $9.6 billion, accompanied by an 81% increase in Lululemon’s net income to $1.5 billion. This surge in net income can be attributed mainly to a notable decrease in the 2023 impairment charge. In the preceding year, Lululemon faced an impairment charge of $407 million, whereas this year’s charge stands at $74 million. 2022’s impairment charge primarily comprises of the impairment of its investment in the home-workout product-range: “Mirror.”

The Americas segment, making up 79% of total sales, experienced a modest revenue increase of nearly 12%. In contrast, the international segment, representing the remaining 21% of sales, witnessed a robust 54% revenue surge. During the earnings call, management articulated their aspiration for the international segment to contribute 50% of sales in the future. They acknowledged a deceleration in the demand growth rate for their products in the Americas’ market. Consequently, they adjusted their annual sales growth projection to around the mid-teens. This adjustment led to a 15% decline in Lululemon’s share price on the day.

Lululemon is investing for growth, primarily targeting the expansion of its brand visibility and bolstering its presence in international markets, particularly in China, where demand for its products has been substantial. To enhance brand recognition, the company is focusing on sponsoring athletes and teams. Notably, they are backing the Canadian national team for the 2024 Summer Olympics. Lululemon intends to address underrepresented markets by opening around 10 stores in the US and 30 stores in other parts of the world.

Lululemon contends with lots of competition in the athleisure sector, including major players like Nike, as well as various niche athleisure brands. Lululemon is a luxury brand within this competitive landscape. Amidst heightened global economic uncertainty, consumers tend to slow down their spending on luxury goods.

Lululemon is held in the Lunar BCI Worldwide Flexible Fund. It is also held by Lunar Capital’s Offshore Portfolio clients.

Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Start of Year
188.33
Last Week
204.52
This Week
207.32
% Change YTD
10.08% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
76 893
Last Week
72 991
This Week
73 254 Lunar Capital increasesymbol
% Change YTD
-4.73% Lunar Capital stocktake arrow down
Index / Fund / Rate
NASDAQ Composite
Start of Year
15 011
Last Week
15 973
This Week
16 429 Lunar Capital increasesymbol
% Change YTD
9.44% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
4 770
Last Week
5 117
This Week
5 234 Lunar Capital increasesymbol
% Change YTD
9.74% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
11.75%
Last Week
11.75%
This Week
11.75%
% Change YTD
0.00%
Index / Fund / Rate
USD/ZAR
Start of Year
18.30
Last Week
20.44
This Week
19.00 Lunar Capital increasesymbol
% Change YTD
3.83% Lunar Capital increasesymbol
Index / Fund / Rate
EUR/ZAR
Start of Year
20.17
Last Week
85.27
This Week
20.62 Lunar Capital increasesymbol
% Change YTD
2.23% Lunar Capital increasesymbol
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
76.97
Last Week
81.82
This Week
85.58 Lunar Capital increasesymbol
% Change YTD
11.19% Lunar Capital increasesymbol
Source: Iress

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Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
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The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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