Q4 2024 Earnings Summary
- Significant growth potential in international markets, particularly China, where revenue grew 78% in Q4 and is expected to significantly exceed company revenue growth guidance in 2024.
- Lululemon maintains durable competitive advantages through its focus on performance-level innovation, direct-to-consumer model, and unique brand positioning that appeals to a broad demographic.
- Ongoing product innovation and marketing investments are expected to drive growth in the U.S., with new product launches and positive guest response anticipated to accelerate sales starting in Q2.
- Lululemon is experiencing a slowdown in the U.S. market, with a "slower start to Q1" and the U.S. consumer environment described as "somewhat challenging", leading to the Americas revenue growth being "below the guided growth range". , , ,
- Gross margins are expected to be flat in both Q1 and the full year 2024, despite previous expansions, and SG&A expenses are expected to deleverage in Q1 due to increased investments, causing operating margin to decline by 130 to 140 basis points in Q1. , ,
- The company's growth is heavily reliant on international markets, particularly China Mainland, which grew by 78% in Q4, while the U.S. market is slowing, potentially exposing Lululemon to geopolitical and market risks. , ,
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China Sales and Growth Outlook
Q: How did China perform, and what's the growth outlook?
A: In Q4, revenue in Mainland China increased by 78% ; for the full year, business grew 67%. Despite macro uncertainties, we expect China's growth rate to be significantly above our guide of 10% to 11% for 2024. -
U.S. Sales Slowdown
Q: Are you seeing a slowdown in the U.S. market?
A: Yes, we're experiencing a soft start in the U.S. with a slowdown in traffic and slight decrease in conversion. The slowdown is fairly broad-based, but we're addressing product opportunities in color and women's sizing (sizes 0 to 4). -
International vs. North America Growth
Q: How does international growth compare to North America?
A: North America is expected to be below our guided growth range, while international is significantly above. All international markets, including Canada, are showing strong momentum. -
Guidance and Margin Outlook
Q: What is the operating margin outlook for 2024?
A: We guided for a 10 basis points operating margin expansion in 2024 , following a 110 basis points expansion in 2023. We continue to invest in market expansion and brand awareness while managing expenses. -
Inventory Levels and Markdown Expectations
Q: What's the status of inventory and markdowns?
A: Inventory came in at negative 9% on a dollar basis and plus 1% on a unit basis. We're pleased with inventory levels and expect markdown rates to remain flat in 2024 compared to prior years. -
Men's Business Growth
Q: How is the men's business performing?
A: Our men's business grew 15% in 2023 and achieved a 21% CAGR over two years, ahead of our Power of Three x2 goal. Innovation in men's products is driving renewed momentum. -
Product Innovation
Q: What new products are expected to drive growth?
A: We're launching innovations like the hydrogen yarn legging for yoga this summer and the support code bra in Q3. Expanded offerings in color and sizing are also expected to boost sales starting in Q2. -
Marketing Investment and Membership Program
Q: What's the plan for marketing investment and membership growth?
A: Marketing spend was 4.5% of sales in 2023 , expected to be 4.5% to 5% in 2024. Our membership program has reached 17 million active members within a year of launch, enhancing customer engagement and spend. -
Competitive Advantages
Q: How does Lululemon maintain its competitive edge?
A: Our advantage lies in innovation in performance-level products, strong community engagement, and a unique direct-to-consumer model. We offer a dual-gender brand appealing across age groups and occasions. -
E-commerce and Store Sales Growth
Q: How are e-commerce and store channels performing?
A: In 2023, e-commerce grew 17% , and stores grew 21% , with e-commerce comps at 17% and store comps at 9%. We see opportunities across both channels leveraging our omnichannel ecosystem.
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