Lululemon Athletica Inc. took a third-quarter hit to profits as it backed away from its Mirror business, but the active standout continued to push ahead, beating adjusted earnings estimates and posting big revenue gains.
Net income slipped 2.6 percent to $248.7 million, or $1.96 a diluted share, from $255.5 million, or $2, a year earlier.
Lululemon inked a deal with Peloton during the quarter and said it would stop making its own content for Lululemon Studio Mirror. It also stopped selling the Mirror home workout device. Mirror, which proved to be a rare misstep for Lululemon, led to posttax asset impairment and other charges of $72.1 million during the quarter.
Adjusted earnings per share tallied $2.53 and came in 25 cents ahead of the $2.28 analysts projected on average, according to FactSet.
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Revenues for the third quarter ended Oct. 29 increased 18.7 percent to $2.2 billion from $1.9 billion a year earlier. The business grew by 12 percent in North America and by 49 percent in the rest of the world. Lululemon added a net of 14 new stores during the quarter for a total of 686.
Calvin McDonald, chief executive officer, described the brand’s products as a competitive advantage on a conference call with analysts.
“Our women’s business increased 19 percent [in the quarter], fueled by new product launches, strength in bottoms and ongoing performance in key franchises,” he said, pointing specifically to the brand’s new Wundermost bodywear, featuring what the CEO said was “our softest fabric ever.”
“By leveraging our expertise in raw materials development, fabric innovation and technical construction, our product teams engineered a brand new sensation and unique solve for our guests,” McDonald said. “I’m pleased to share that the Wundermost launch has been met with great initial response from our guests, and we’re excited to keep bringing innovation into this new franchise.”
Lululemon is also building in men’s, but has more work to do in the category, which grew 15 percent in the quarter, on par with the growth rate seen during the pandemic.
“We see that when there is some uncertainty in the macro environment, men can become a bit more conservative in their apparel purchases,” said McDonald, adding that international growth in the category remained strong.
“We’re also gearing up to launch men’s footwear in the first quarter of 2024, which will be an important moment for Lululemon and we will have much more to share as our pipeline of innovation continues to generate newness and versatility for our male guest,” he said.
For the full year, the company nudged up its profit guidance and is now looking for adjusted EPS to range from $12.34 to $12.42, ahead of the $12.02 to $12.17 projected in August.
Lululemon’s revenues guidance also moved a little higher, with the top line now expected to grow by about 18 percent to a range of $9.55 billion to $9.58 billion.
But Wall Street, trained to expect big things from Lululemon, wanted a little more and shares of the company slipped 2.6 percent to $452.60 in after-hours trading on Thursday.
McDonald said the Thanksgiving weekend was successful, with Black Friday the biggest single day in the company’s history.
“While there is nearly two-thirds of the quarter still ahead of us, we are encouraged by our trends at the start of the holiday season,” he said.
This story was reported by WWD and originally appeared on WWD.com.
