Lululemon Athletica Inc., the upscale yogawear maker, posted third-quarter earnings and revenue that beat expectations as online sales boomed.

Net revenue rose 22 per cent to US$1.1 billion, outpacing estimates. For the key measure of same-store sales, the 18 per cent growth, after excluding currency effects, was also well above the 4.3 per cent estimate from Consensus Metrix.

Key Insights

• Lululemon is still upbeat about physical stores and plans to have about 100 smaller, temporary locations open for the holidays. Still, the company expects store productivity to be 70 per cent below last year’s level this quarter as governments add restrictions to fight the resurgence of COVID-19 cases. About 97 per cent of its locations are open, executives said during an earnings call with analysts.
• The company now sees fourth-quarter revenue growing “in the mid to high teens” after a Thanksgiving week that saw a “record-breaking performance” from e-commerce. That helped to offset a brick-and-mortar decline in traffic.
• Lululemon’s inventory increased 23 per cent at the end of the quarter from a year earlier. That’s a slower pace than the previous period, and signals that its merchandise is flowing out the door.
• The company has accelerated e-commerce investment during the pandemic to be ready for a holiday surge. It’s also been among the first retailers to offer video consultations with associates. Online sales accounted for 43 per cent of revenue during the quarter.

Market Reaction

The shares fell less than 1 per cent in late trading on Thursday. The stock has already risen 59 per cent since January.