Lululemon (LULU) earnings for the first quarter of 2023

Lululemon reported earnings that beat Wall Street estimates in top and bottom earnings Thursday and raised its guidance for the full year, helped by improvements in China and shipping costs.

Shares of the company are up more than 12% in extended trading.

Here’s how the retailer does it fiscal first quarter Compared to what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: $2.28 vs. $1.98 expected
• he won: 2 billion dollars vs. $1.93 billion expected

The company’s reported net income for the three-month period ended April 30 was $290.4 million, or $2.28 per share, compared to $190 million, or $1.48 per share, a year earlier.

Sales increased 24% to $2 billion, compared to $1.61 billion a year ago.

China revenue alone grew 79% over the same period last year, when the country was still reeling from Covid restrictions and nearly a third of Lululemon’s 71 Chinese stores were closed for a while.

“Our results in the first quarter were strong as guests responded well to our product offerings in all of our markets around the world. A significant acceleration in our sales trend in China, coupled with lower air freight, contributed to a better-than-planned financial performance,” Chief Financial Officer Megan Frank said in a statement. “We are pleased with our momentum going into the second quarter and for the full year as evidenced by our revised outlook for fiscal ’23.”

The retailer now expects to see full-year revenue of $9.44 billion to $9.51 billion, up from the previous range of $9.31 billion and $9.41 billion, beating Wall Street’s forecast of $9.37 billion, according to Refinitiv. It expects full-year earnings of $11.74 to $11.94 per share, compared to an earlier range of $11.50 to $11.72. That also beat analyst expectations, which called for $11.61 per share, according to Refinitiv.

Lululemon expects second-quarter sales to be in the range of $2.14 billion to $2.17 billion, representing growth of about 15%. Lululemon expects diluted earnings per share to be in the range of $2.47 to $2.52 for the period. Second-quarter guidance was largely in line with Wall Street’s expectations, according to Refinitiv.

The apparel retailer, which sells high-end yoga pants, shoes and other activewear, saw a 24% year-over-year increase in sales, although it posted solid comparisons to the year-ago period, which came during an easier macroeconomic backdrop..

This time last year, Lululemon just raised its prices, but shoppers are still flocking to its stores and filling their digital carts. They have not yet felt the pressure of persistent inflation.

Comparable-store sales in the most recent quarter jumped 13%, compared to StreetAccount’s estimate of 8.3% growth. However, direct-to-consumer revenue rose 16% from the same period last year, which is less than the 22.3% expected by analysts, according to StreetAccount.

And while DTC’s revenue increased year over year, it accounted for 42% of total sales, compared to 45% in the year-ago period.

Gross margins in the third quarter increased 3.6 percentage points, to 57.5%. This was higher than the profit margins of 56.7% that analysts had expected, according to StreetAccount.

While the company largely caters to higher-income consumers, who tend to fare better against macroeconomic pressures, retailers across the industry have cited declining discretionary spending and higher-ticket items.

During Nordstrom’s earnings call Wednesday night, executives noted that high-end customers are “very resilient,” but they’ve also become more cautious.

During this earnings season, some analysts warned soft-goods retailers, or those who sell items such as apparel and footwear, could see margins drop due to increased promotional activity and a general downturn across the sector.

Results so far this quarter have been mixed.

Many retailers have benefited from supply chain tailwinds, such as lower shipping costs, that have boosted their margins. But for some, a lot of those savings have evaporated due to increased promotions and a surge in deflation, among other headwinds.

This was true of Foot Locker, but others in the category, including Gap and Urban Outfitters, have been able to maintain ranks on promotions and see benefits on their margins.