Lululemon shares soared on Friday as investors react to the company's better than expected first quarter earnings report, which included a an increase in its full-year guidance. The athletic apparel company got a boost from strong sales in China. There were however, some surprising U.S. sales results too, as Yahoo Finance's Julie Hyman and Brad Smith explain.
BRAD SMITH: Lululemon surging in pre-market trade, and it's an international growth story here. Revenue in China surged almost 80% on the year. This time last year was a very different story in the nation, of course, there with COVID zero policies still in place.
However, take a look at the shares pre-market. They're up 16%. And some of the key areas, China included, but then additionally, if you were to look through what they-- or listen in to what they talked about over the course of the earnings report, there are a few things that I was hoping they would say more about.
Of course, this is a company that has done so well in changing the way that athleisure companies have gone more direct to consumer. But they're also trying to enhance the product mix that they do have. Footwear, one of those categories that I looked into a little bit more, really only had kind of five mentions word basis on the call.
But I think that strategy is what investors want to hear more about going forward as well, considering that it can be very difficult to take on market share, but if they are able to do so successfully, whether that be brick and mortar or whether that be online sales, I think that's where investors can perhaps hang their hat on. Some of that future growth coming through at Lululemon.
And then additionally, it's just a regional story as well that we witnessed in the most recent quarter, but going forward, what does the US consumer, an area where Lululemon has really hung its hat for so long, what does that consumer hold given some of the discretionary spending that we've seen waver moderate or even dry up in some income brackets, as we had heard from other retailers over the course of this earnings season.
JULIE HYMAN: It's not happening with them. I mean, China sales were undeniably strong. Up 79%. They have 101 stores now and now. They're planning to open more this year of those China stores as well. They're opening a bunch of international stores, and they said most of them are going to be in China. I think 30 to 35 international stores is what they're talking about here.
But guess what, the US numbers weren't bad, right. The company said Comp stores were up 16% in their stores, 18% in the e-commerce business. North America overall was up 17%. This struck me as well. Women's sales up 22%, men's sales up 17%. Accessories up 67%.
BRAD SMITH: Those belt bags.
JULIE HYMAN: I assume it's the belt bags, right. I don't know if footwear falls into the accessory category. I would think so, right. And that's a higher ticket accessory item than a belt bag, for example.
BRAD SMITH: Yeah.
JULIE HYMAN: They sell lots of other stuff. I have a Lululemon backpack. I got a--
BRAD SMITH: I do too.
JULIE HYMAN: --Lululemon yoga mat. So there are those other things that they're-- but that that's striking to me that the growth, in particular in accessories, I thought was quite interesting. So obviously, the market greeting all of this very enthusiastically and emphasizing the China sales, in particular.
BRAD SMITH: They've got a really solid flip-flop. I'll say that anecdotally.
JULIE HYMAN: Oh, a flip-flop.
BRAD SMITH: I tried that out.
JULIE HYMAN: I didn't know anything about that.
BRAD SMITH: I've tried it on in multiple stores. I still haven't purchased just yet. I've been looking for my size. However, the men's flip-flop feels very good. I just wish that we'd see more of the footwear categories start to move forward. Perhaps we will over at Lululemon.
JULIE HYMAN: Maybe one more quick quick note here is what we saw in inventory. Inventory still was higher by, I think, something like 24% year over year, which is a slowdown in the inventory increase. But they still talked a little bit about the promotions that are still happening. So that's just something to keep an eye on as we go forward. The so-called we made too much category is Lululemon's euphemism for--
BRAD SMITH: A favorite [INAUDIBLE].
JULIE HYMAN: --sale.
BRAD SMITH: Yeah.
JULIE HYMAN: Of course.
BRAD SMITH: And it looks like they do break out footwear separately aside from accessories.
JULIE HYMAN: Oh, interesting.
BRAD SMITH: Yeah.
JULIE HYMAN: So that wasn't the--
BRAD SMITH: [INAUDIBLE]
JULIE HYMAN: --same increase.