Lululemon stock soars, investors celebrate sales, new membership plan

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Shares of Lululemon Atlletica rallied as much as 12% Friday after beating Wall Street expectations for the fiscal second quarter of 2022.

The athletic apparel retailer saw net revenue increase 29% year-over year to $1.87 billion during the three months ended July 31. The analyst estimate was $1.77 billion. Comparable store sales grew 23%. 

Net income for the quarter was $289.5 million, or $2.26 per diluted share, up from $208.1 million, or $1.59, in the year ago period.

Adjusted per-share earnings were $2.20, beating estimates of $1.87, according to Refinitiv data.

Lululemon Athletica

"Despite the challenges around us in the macro-environment, guest traffic in our stores and on our e-commerce sites remains robust, which speaks to the strength of our multi-dimensional operating model," Chief Financial Officer Meghan Frank said in a statement.

Lululemon CEO Calvin McDonald told analysts on the company's earnings call Thursday that store traffic increased over 30%, while e-commerce traffic jumped over 40%.

Lululemon CEO Calvin McDonald told analysts on the company’s second quarter earnings call on Thursday that store traffic increased over 30%, while e-commerce traffic jumped over 40%.  (iStock / iStock)

The strong earnings come as the retailer of yoga pants and other yoga wear prepares to launch a new two-tiered membership program.

The free membership tier will offer early access to the company's products, including exclusive items, and an invitation to in-person community events. Meanwhile, the $39 per month Lululemon Studio tier will include the same benefits as the free tier as well as fitness classes from Lululemon partners like Rumble, Y7, Pure Barre and DogPound.

Within the next five years, Lululemon expects 80% of its guests to be part of one of its membership programs.

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Looking ahead, Lululemon expects net revenue to be in the range of $1.78 billion to 1.81 billion, representing a three-year compound annual growth rate (CAGR) of approximately 25%. Diluted earnings per share are expected to be in the range of $1.90 to $1.95 for the quarter.

For the full year, the company anticipates net revenue between $7.87 billion to $7.94 billion, representing a three-year compound annual growth rate of approximately 26%. Adjusted diluted earnings per share are expected to be in the range of $9.75 to $9.90.

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Lululemon plans to double its 2021 net revenue of $6.25 billion to $12.5 billion by 2026 by doubling its men's and direct to consumer revenue and quadrupling its international net revenue relative to 2021.

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