Lululemon Appears To Be Insulated From Recession With Its Premium Yoga Put on

Lululemon Seems To Be Insulated From Recession With Its Premium Yoga Wear

On Tuesday, shares of Lululemon Athletica Inc (NASDAQ: LULU) rose about 11% upon quarterly outcomes that topped Wall Road expectations. The retailer of high-end yoga gear had fairly a holiday-quarter that topped estimates on fiscal 2023 income and full-year revenue. In contrast to cautious Nike Inc (NYSE: NKE), Lululemon additionally issued upbeat steering for the brand new fiscal 12 months.

Fourth Quarter Figures

For the three-month interval that ended on January twenty ninth, income rose from final 12 months’s $2.13 billion to $2.77 billion with internet revenue falling from $434.5 billion, or $3.36 per share earned throughout final 12 months’s comparable quarter to $119.8 million, or 94 cents per share. Placing apart impairment and different fees associated to the acquisition of Mirror and different objects, adjusted per share earnings amounted to $4.40. Complete comparable or same-store gross sales that account shops which were repeatedly open for at the least 12 months rose 27%.


Lululemon expects fiscal 2023 income within the vary between $9.3 billion and $9.41 billion, exceeding $9.14 billion that Wall Road anticipated, in keeping with Refinitiv, with full-year revenue anticipated within the vary between $11.50 and $11.72 per share, additionally topping Refinitiv estimate of $11.26 per share.

Stock Struggles

In December, Lululemon stated inventories on the finish of its third quarter had been up 85% YoY to $1.7 billion whereas on Tuesday, it acknowledged that as of the tip of 2022, inventories had been up 50% to $1.4 billion. As a comparability, throughout its newest reported quarter, Nike reported its inventories had been up 16% in comparison with final 12 months’s comparable quarter. Consequently, Lululemon’s gross margins fell 300 foundation factors to 55.1% whereas adjusted gross margin slid 70 foundation factors to 57.4% so each manufacturers harmed their margins with efforts to do away with extra stock.

Notably, Lululemon made progress liquidating extra stock, however Morningstar analyst David Swartz informed Yahoo Finance that it does seem like Lululemon needed to resort to extra discounting to regular to get the reported gross sales figures, but the Vancouver-based athletic attire retailer doesn’t like to speak a lot about discounting.

What Does Lululemon Have That Nike Doesn’t?

Though each attire corporations do an incredible job at standing out from the group, Lululemon’s consideration is solely on the premium and better finish of the attire market. In a manner, Lululemon could be thought of as a pioneer of the “athleisure” motion which allowed it to collect a buyer base that even Nike failed to handle totally. As individuals sought out extra snug high quality apparel in the course of the pandemic-induced lockdowns, Lululemon gained a big benefit when it comes to premium clients who’re each keen and capable of pay up for his or her athleisure put on merchandise and it is a nice power of Lululemon within the face of recession fears.

The Lawsuit Saga

On the finish of January, Nike revealed it’s suing Lululemon for patent infringement associated to at the least 4 of its sneakers, stating it has suffered financial hurt and irreparable damage because of this. This newest lawsuit is barely a brand new chapter in a contentious authorized historical past between the 2 corporations as the Oregon-based Nike beforehand sued Lululemon for patent infringement over its at-home Mirror health system. In each instances, Lululemon finds these claims unjustified.


Lululemon’s outcomes counsel that wealthier consumers are nonetheless buying yoga put on, regardless of inflation rising costs for important items. By way of Tuesday’s shut, Lululemon’s market worth reached $40.87 billion. Though that is nonetheless not a dominant model within the trade like Nike, Lululemon’s shouldn’t be going wherever because the Vancouver-based athletic attire retailer believes it is among the few corporations with an extended pathway for development forward. Plainly premium yoga put on does an incredible job at insulating towards a recession, however Lululemon nonetheless must show its model’s sturdiness over an extended time period.

DISCLAIMER: This content material is for informational functions solely. It’s not meant as investing recommendation. 


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