When it comes to Lululemon and its customers, the brand seems to create a retail cult following, leaving many to wonder: What’s the secret sauce that makes these customers so committed to this athleisure temple of sorts?
“One of our competitive advantages is our ability to consistently bring newness and innovation into our assortment,” said Calvin McDonald, CEO of Lululemon, during the brand’s latest earnings call Thursday (Dec. 7).
In fact, the company reported that in the third quarter, the women’s business segment increased 19%. This growth was attributed to the success of new product launches, reinforced bottoms, and continued strong performance in key franchises.
However, McDonald mentioned that although the men’s category grew 15% in the quarter, akin to the trends observed during COVID-19, there was uncertainty in the environment — specifically, he noted that men appeared to be more conservative in their apparel purchases.
Considering this, the company has turned to its community engagement initiatives, aiming to alter this dynamic and leverage “any potential upside,” according to Meghan Frank, CFO at Lululemon.
As part of its community-focused efforts, Lululemon released its third annual global wellbeing report in September, exploring people’s approaches to physical, mental, and social well-being across 14 markets. Additionally, the company organized wellness-focused experiences in key markets and orchestrated an activation in China spanning 32 cities and 76 stores.
The pinnacle event in Shanghai, covering a 3-kilometer stretch along the waterfront, garnered over 1,600 pieces of press coverage, 3 billion impressions, social media engagement, and about 12,000 in-person participants, according to Lululemon.
In October, Lululemon further strengthened its brand presence by hosting a three-day experience at its Lincoln Park store in Chicago, coinciding with the launch of its partnership with Peloton. Over 2,000 attended, showcasing the unity of the local Lululemon and Peloton communities.
“This was another strong quarter for Lululemon as our innovative product offerings and community activations continued to powerfully resonate with our guests globally,” McDonald said in a press release.
“As we enter the holiday season, we are pleased with our early performance and are well-positioned to deliver for our guests in the fourth quarter. I am energized by the significant opportunities ahead, and would like to thank our incredible teams around the world for their continued passion and commitment to our brand.”
In the third quarter of 2023, Lululemon reported a 19% increase in net revenue to $2.2 billion. The growth was driven by a 12% rise in North America and a 49% increase internationally.
Comparable sales grew by 13%, with a 9% increase in comparable store sales. Direct to consumer net revenue increased by 18%. Gross profit rose by 21%, reaching $1.3 billion, and the gross margin expanded to 57%. Income from operations decreased by 4%, but adjusted income increased by 24%. The effective tax rate was 28.5%, with an adjusted effective tax rate of 28.1%.
Lululemon entered a partnership with Peloton, discontinuing its own content for the Lululemon Studio Mirror and recognizing charges of $72.1 million. Diluted earnings per share were $1.96, and adjusted diluted earnings per share were $2.53.
The company opened 14 net stores, concluding the quarter with 686 stores.
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