Lululemon Continues Growth Despite Lower Guidance on Its Mirror Business

Lululemon continues its growth in the third quarter despite slashing its forecast for Mirror, the at-home fitness device it acquired last year for $500 million.

The updated estimates, which lowers Mirror’s revenue guidance for the year from $250 million and $275 million to $125 million and $130 million, caused the athletic brand’s stock to dip 10 points on Friday morning.

“Given the seasonality of Mirror’s business, which skews heavily to the fourth quarter, the timing of this revision is appropriate given the line of sight we have on its performance,” Lululemon CEO Calvin McDonald said on the company’s third quarter earnings call.

McDonald noted that Mirror did grow its subscribers by 40% year-over-year in the third quarter as the company works to create a “loyalty community that captures the best of Lululemon.”

Overall, Lululemon reported a net revenue increase of 30% to $1.5 billion in the third quarter of 2021, with a gross profit increase of 32% to $829.4 million, compared to the third quarter of 2020. This performance caused the retailer to raise its guidance for the year with an expected net revenue to be in the range of $2.125 billion to $2.165 billion.

“Our third quarter results demonstrate the ongoing strength of Lululemon and the tremendous growth potential of the business in both the near- and long-term,” McDonald said on the call. “We are pleased with our early holiday season performance and how the Lululemon brand continues to resonate in markets around the world.”

As for the crucial Thanksgiving weekend, McDonald said he was pleased with the company’s performance as it delivered “record-breaking days” in several key metrics, including sales, traffic and conversion through its e-commerce channel. McDonald noted that Thanksgiving Day was its highest-volume e-commerce day ever.

Shifting to the supply chain, McDonald noted on that call that Lululemon continues to face the same issues as much of the industry, including port slowdowns and increased costs associated with airfreight. He also shared that all of the company’s Vietnam factories have reopened and continued to ramp up their capacity. He also said that while the summer closures caused some delays, the company’s total inventory at the end of the third quarter was up 22%, slightly ahead of its most recent expectations of 15% to 20%.”

“We have begun the fourth quarter with the inventory, staffing and strategies in place to enable us to finish 2021 in a position of strength as we expect to pass the $6 billion annual revenue level for the first time,” McDonald said.

As for the company’s much-anticipated footwear launch, McDonald confirmed to investors that the company is still on track for a spring ’22 launch. “We’re excited about it, excited about the opportunity and our unique position,” he added. “We are taking a growth approach to this new initiative.”

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