Lululemon says its China revenue climbed a whopping 79% in Q1

Lululemon Athletica Inc (NASDAQ: LULU) just reported strong results for its first financial quarter on the back of China’s reopened economy. Its shares are up nearly 15% in extended hours.

Lululemon stock up on strong outlook

The retail stock is cheering raised guidance as well. Lululemon now forecasts sales to come in between $9.44 billion and $9.51 billion on up to $11.94 of per-share earnings. In comparison, analysts were at $9.37 billion and $11.60 a share, respectively.

Versus its year-to-date high, Lululemon stock is now up more than 25% already. Still, it may not be too late to invest considering Citi analyst Paul Lejuez sees further upside in it to $440. In a recent note to clients, he said:

Lululemon has no signs of sales slowdown, underscoring its brand strength/momentum in its largest market.

China to remain a growth driver for LULU

On Thursday, the athletic apparel company reported a 13% annualised growth in comparable sales for its recently concluded quarter – well above the Street estimates. According to the Citi analyst:

While many retailers that saw big sales increase during pandemic also saw big margin expansion, LULU has consistently invested in its business which will drive continued topline growth in the mid-teens.

Lejuez expects China to make up roughly 22% of the company’s total annual sales by fiscal 2027 versus just 8.0% last year. In Q1, its China revenue was up a whopping 79%.

DTC sales, though, climbed a weaker-than-expected 16% in Q1, as per the earnings press release.

Notable figures in Lululemon Q1 earnings report

• Net income printed at $290.4 million versus year-ago $189.9 million
• Per-share earnings also climbed significantly from $1.48 to $2.28
• Revenue went up 24% on a year-over-year basis to $2.0 billion
• FactSet consensus was $1.96 a share on $1.92 billion in revenue
• Gross margins improved a better-than-expected 3.6 percentage points