Making Lululemon-ade
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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.
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Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
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.
Making Lululemon-ade Read More »
Lululemon’s three growth drivers are product innovation, guest experience and market expansion in athleisure wear. It aims to double (X2) its digital and men’s wear business to achieve a quadruple growth in its non-US sales by 2025. Lululemon is renowned for its athleisure designs catering to various sports codes.
Last week, Lululemon, a business owned by Lunar Capital, unveiled its Q3 2023 results, reported a notable 19% surge in revenue, reaching $2.2 billion for the quarter. Sales in North America saw a 12% increase, while international sales increased by 49%. The latter was mainly attributed to sales in China, which has recently encouraged growth in its economy through favourable policies.
Lululemon’s gross margin for the quarter increased by 110 basis points to achieve 57%. However, there was a 4% decrease in income from operations, settling at $338.1 million. This dip in profit was predominantly a result of an impairment charge incurred on their Mirror product range. Lululemon have decided to discontinue the sale of the hardware associated to the Mirror. Mirror is a subscription service to access thousands of streaming exercises. This service will continue in partnership with Peloton.
Lululemon’s stock price has surged 51% this year, reaching a share price $489.64 per share and boasting a market cap of $61.96 billion as of Friday. Several factors have contributed to the positive sentiment surrounding Lululemon:
Lululemon is currently enjoying a favourable position and it appears that its Three x 2 strategy is working despite facing intense competition in the market. The challenges come not only from established competitors like Nike, who boast a stronger balance sheet, but also from emerging players entering the field. These newcomers have the potential to introduce novel styles and trends that might resonate more effectively with customers. Despite the competitive landscape, Lululemon’s strengths and strategic advantages position it well in navigating the dynamic and evolving nature of the market.
Lululemon is held in the Lunar BCI Worldwide Flexible fund. It is also held by Lunar Capital’s Offshore Portfolio clients.
This marks the final stocktake for the year, and we’ll resume our updates in January. Our team will continue monitoring the market and the portfolios we manage; and supporting our clients.
We extend our heartfelt gratitude for an incredible year and wish all our clients, staff and partners a joyful and safe festive season.
Click here to access your account to view statements, obtain tax certificates, add or make changes to your investments.
Our email address is: [email protected]
Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
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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