Lululemon just reported better-than expected results for the first quarter, in part driven by the brand’s successful launch into new categories like footwear, golf and tennis.
The Vancouver, British Columbia-based athleisure brand reported that first quarter net revenues increased 32% to $1.6 billion versus an expected $1.53 billion. In North America, revenues increased 32%. Earnings per share were $1.48 compared to an expected $1.43.
Lululemon launched footwear for women in March. CEO Calvin McDonald said in a call with investors that demand for the new products in Q1 were in excess of supply and “far exceeded” the company’s expectations.
“We definitely had a lot more demand than we anticipated,” McDonald said of the shoe collection, which kicked off with the Blissfeel running shoe in March and the Restfeel slide this week. Two more training shoes, the Chargefeel and the Strongfeel, are set to roll out this year. Though the shoes were designed for women first, the brand plans to launch a collection of men’s footwear in 2023.
McDonald said the shoes sold out more quickly than would have been desired in “an ideal scenario,” though he described the success at this early stage as encouraging.
“The team is focused on learning and adapting. What’s challenged that a little bit is the global supply chain challenges.” McDonald said. “So we’re going to build the category and we’re going to learn as we go.”
Within golf and tennis, Lululemon said that a sport-specific design approach helped propel momentum in these categories as well.
“Leveraging golf during both the Masters and the PGA Championships in the future is a wonderful opportunity to put a spotlight on our product and our assortment,” McDonald said, adding that the company plans to launch hike in the hike category in the coming weeks.
Analysts also noted the strong sell-through power of these new impactful categories.
“Initial response to footwear, golf, and tennis generated huge sell-through with hiking planned to launch soon,” said Cowen Equity analyst John Kernan.
In April, Lululemon announced a plan to expand its men’s business, including the addition of footwear, as part of a larger five-year growth strategy to double revenue to $12.5 billion by 2026. It will do this by “innovating” across product categories in its core performance division (run, train, yoga and “on the move”) as well as its “play” division (tennis, golf and hike).
When asked about the possibility of crowding the consumer with too many options, McDonald said he is not concerned.
“In many cases, it’s how our guests are already … using our product,” he said. “We are just putting a brand story on it with a small number of design for products that validates, brings credibility already to the product and lifts it.”