Spending

Lululemon’s second-quarter revenue hits $1.9 billion as high-income shoppers continue to spend

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Diving brief:

  • Standing out from the rest of the industry, Lululemon’s total revenue for the second quarter increased by 29% year-over-year to $1.9 billion due to increased store sales, according to a company press release Thursday. Direct-to-consumer revenue increased 30% to $775.4 million and accounted for 41.5% of total net income.
  • The company’s inventory is up 85% year-over-year, but CEO Calvin McDonald said on a conference call with analysts that’s not a problem because it compares to when the company had too little inventory to meet demand. He also said that transactions for new customers increased by 20% in trimester.
  • Lululemon’s customer base responded well to new collections launched in the quarter, such as the expansion of hiking and footwear, according to McDonald’s. The brand will expand its running, hiking and footwear collections throughout the rest of the year, in addition to launching a two-tier membership benefits program for customers.

Overview of the dive:

Lululemon is thriving in a tough retail environment, without increasing markdowns. Second quarter results follow the success of the last quarterwhose turnover increased by 32%.

“We looked closely at our customers’ data and metrics to identify any changes in spending patterns, behaviors or habits. And to date, I’m happy to share that we’re not seeing any significant variation in cohort behavior or the metrics we track in this area of ​​the business,” McDonald said.

While traffic has increased across all of the company’s channels, McDonald’s noted that Lululemon “does not create this traffic through markdowns or price promotions.” The company has not changed its promotional cadence or markdown strategy and has no plans to do so, according to McDonald.

The retailer also reported that women’s income has increased by 25% based on a 3-year compound annual growth rate, and that of men increased by 30%.

Regarding supply chain issues that many retailers are still facing, McDonald’s noted that the company is monitoring these issues, but does not have any closures with suppliers at this time. He also said production is resuming in China, ocean delivery times are improving and air freight rates are starting to drop.

Lululemon’s results stand in stark contrast to the rest of the industry.

“Indeed, it’s almost as if the business is on a different planet from the rest of retail,” GlobalData chief executive Neil Saunders said in comments via email.

Saunders said that while Lululemon is not immune to economic pressures, it has coped better since its consumer base tends to have higher incomes and it has refused to resort to increasing discounts.

“It makes him a clear winner in the pandemic…and looks set for more wins in the quarters to come,” Saunders said.