[Overseas Stocks Spotlight] "Lululemon's Q2 Sales Growth Driven by D2C Channel"

[Asia Economy Reporter Eunmo Koo] Shinhan Financial Investment reported that despite the impact of the COVID-19 shutdown, the D2C (Direct to Consumer) channel drove revenue growth in the second quarter for premium Pilates apparel company Lululemon (LULU.US). Although there is currently a price burden, the stock price correction could present a buying opportunity.

Lululemon's revenue for the second quarter of this year (May to July) was $900 million, a 2% increase compared to the same period last year, while earnings per share (EPS) were $0.74, a 23% decrease, exceeding consensus estimates by 7% and 32%, respectively. Researcher Hyunji Lee of Shinhan Financial Investment explained in a report on the 13th, "The D2C channel drove top-line growth, offsetting the offline store slump caused by the shutdown."

By channel, D2C revenue was $550 million, growing 154.7% year-over-year, while company-operated stores generated $290 million, down 50.8%. Other segments decreased by 25.1% to $60 million. Lee explained, "Proactive investments such as building an omnichannel system and expanding logistics facilities enabled increased order processing, expanding the D2C share to 61.4%." By category, women's apparel increased 5.4% to $650 million, men's apparel decreased 10.2% to $190 million, and other segments grew 15.0% to $60 million. By region, North America revenue shrank 3.1% to $740 million, while overseas segments expanded 37.5% to $160 million.

Amid the global stock market rebound, Lululemon's outstanding returns stood out. Lululemon rose 187% from its low, surpassing the Nasdaq index return of 76%. Researcher Lee analyzed, "The growth interest was driven by increased home training demand post-pandemic, flexible D2C channel sales response during lockdowns, a solid position as a premium brand, and overseas store expansion momentum. Additionally, the acquisition news of the smart mirror startup 'Mirror (MIRROR)' further increased upward pressure on the stock price."

The current stock price is trading at about 62 times the 12-month forward price-to-earnings ratio (PER). Lee forecasted, "Although price pressure exists as it continuously breaks previous highs, stock price corrections should be used as buying opportunities. Based on proven competitiveness during the pandemic, the mid- to long-term growth trend is expected to continue."