Lululemon announces second quarter earnings report, digital revenue soars by 155%.

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Lululemon announces second quarter earnings report, digital revenue soars by 155%.

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Lululemon Athletica Inc. (NASDAQ: LULU) Delaware based athletic apparel retailer announced its second quarter of the fiscal year 2020, ended 12th August 2020, on 8th September 2020.

Due to the Covid-19 pandemic, the first quarter wasn’t very impressive but in the second quarter of 2020 Lululemon’s digital revenue increased by 155%  while the net revenue increased by 2%.

The company opens up 97% of its stores.”The Company began reopening its retail locations in these markets during the second quarter of fiscal 2020. As of August 2, 2020, 492 of its 506 company-operated stores were open.” As stated in the report.

Calvin McDonald, CEO of lululemon stated that the company is very pleased with the results.

THE SECOND QUARTER RESULTS

  • Net revenue increased by 2%, to $902.9 million for the second quarter of 2020 from $883.4 million for the second quarter of 2019.
  • The company reported cash generated from operating activities for $60 million.
  • The second quarter of 2020 ended with $523 million in cash and cash equivalents
  • Gross profit increased by 1% to $489.5 million.
  • Income from operations decreased by 26%.
  • Digital revenue increased by 155% while offline store revenue decreased by 51%.
  • The company reported more than 90% increase in website traffic and the conversion increased by 45%.
  • Segment-wise results-
    1. Company-operated stores
        1. Revenue for the second fiscal quarter of 2020 was $287 million, which fell by 51% from $583.75 million recorded last year.
        2. Income from operations for the company-operated stores segment in the second quarter of 2020 declined by 96%, from income from operations of $ 154 million in 2019 to loss from operations of $5.3 million in 2020.
    2. Direct to consumer- It represents the digital revenue earned by the company, sales from the Company’s e-commerce websites, and mobile apps
        1. The revenue increased by 155% in the second quarter of 2020 from $ 217.64 million in the second quarter of 2109 to $555 million in 2020.
        2. Income from operations increased 174%, from $86 million in 2019 to 238 million in 2020.
    3.  Other- It includes revenue from outlets, temporary locations, sales to wholesale accounts, license and supply arrangements, and the sale of in-home fitness equipment and associated content subscriptions.
        1. The revenue decreased by 25% from $81 million in the second quarter of 2019 to $61 million in the second quarter of 2020.
        2. The income from operations decreased by 84% from $16.5 million in the second quarter of 2019 to $2.5 million in the second quarter of 2020.
  • Lululemon opened eight company-operated stores in the U.S., seven company-operated stores in Asia, and two in Europe in Q2 2020.
  • Diluted earnings per share reported in the second quarter were $0.66 compared to $0.96 in the second quarter of fiscal 2019.
  • Adjusted diluted earnings per share were $0.74 for the second quarter of fiscal 2020.

OUTLOOK

The company did not offer 2020 outlook due to uncertainty surrounding the pandemic.

The Ceo of Lululemon, Calvin McDonald commented that the company is “cautiously optimistic with regard to the second half of the year” as the company navigates solutions through this uncertain environment.

As the coronavirus pandemic lead to shut down of fitness centers, people switched to home workouts offered online, a lot of companies are trying to capitalize on this on-going trend.

During the second quarter of fiscal 2020, Lululemon acquired MIRROR, a leading in-home fitness company with an interactive workout platform that features live and on-demand classes, for a purchase price of approximately $500.0 million. The company believes this acquisition would be fruitful as it will bolster its digital presence.

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