To The Moon

$Lululemon Athletica(LULU)$ is scheduled to report third quarter 2024 earnings on 05 December 2024 after the market close.

LULU projected growth is expected to slow down from a double-digit pace to 6.9% compared to same period last year. The Holiday-quarter outlook will be key. The yoga wear retailer has struggled with a slowdown in the U.S. and botched product launches.

But we are seeing the improvement from international market like China for LULU sales. The consensus earnings per share forecast is at $2.71 which is higher than $2.53 same period last year.

Lululemon Athletica (LULU) Sales Revenue For Last Quarter. Competitors Sales Growing Too

Lululemon Athletica reported $2.37B in Sales Revenues for its fiscal quarter ending in July of 2024.

ANF Revenue Breakdown Show Contribution Increasing From Foreign Region

$Abercrombie & Fitch(ANF)$ current fiscal quarter's total revenue for Abercrombie, as projected by Wall Street analysts, is expected to reach $1.56 billion, reflecting an increase of 7.1% from the same quarter last year. The breakdown of this revenue by foreign region is as follows: Asia Pacific is anticipated to contribute 2.6% or $40.67 million and Europe, Middle East and Africa 14.7% or $228.6 million.

For the entire year, ANF's total revenue is forecasted to be $4.91 billion, which is an improvement of 14.8% from the previous year. The revenue contributions from different regions are expected as follows: Asia Pacific will contribute 3% ($145.29 million) and Europe, Middle East and Africa 15.5% ($761.13 million) to the total revenue.

So if we were to look at Lululemon international sales, we could be expecting LULU sales and revenue contribution from the international market to be significant.

China Athleisure Growth Is Dominant In Its Sportswear Market

Lululemon's market share in China is growing, and the country is expected to become a major part of the company's global revenue: 

• Revenue growth: In Q2 2024, Lululemon's revenue from China grew 34% year-over-year, generating $1 billion in sales. 

• Store count: Lululemon has expanded from around 10 stores in 2018 to over 130 by 2024. 

• Market share: China is now Lululemon's second-largest market after the U.S. 

• Global revenue: China could contribute up to 20% of Lululemon's global revenue by 2026. 

• Growth plan: Lululemon plans to quadruple international revenue by 2026, with China becoming its second-largest market worldwide

Lululemon's expansion into China's mainstream market, including efforts to capture lower-tier cities, poses challenges. It faces competition from domestic giants like Anta Sports and Li-Ning, along with cheaper local brands offering high-quality knockoffs. However, Lululemon leverages its diverse product range, which now spans beyond yoga wear to include attire for multiple occasions, tapping into an unmet demand for versatile apparel.

One more golden opportunity for luxury sportswear like Lululemon is China’s sportswear surge. The rapidly growing sportswear segment, propelled by national pride and a focus on health and wellness, presents new opportunities for luxury brands.

China’s sports and sportswear industries are experiencing unprecedented growth, presenting a lucrative frontier for luxury brands that incorporate sportier elements into their offerings. A rising focus on health and fitness, along with the success of domestic sportswear giants like Anta and Li-Ning, underscores this transformation.

Athleisure has grown to become a dominant force in China’s sportswear market. Forecasts suggest that this category will grow by over 9% annually, with yoga apparel alone expected to reach $3 billion by 2028. The popularity of this category aligns with a broader trend where sportswear becomes a lifestyle choice rather than just athletic gear.

Consumers, especially those from younger demographics, seek versatile apparel that transitions seamlessly between gym, office, and social settings. Luxury brands like Prada and Dior, which have already introduced athleisure elements into their collections, can further strengthen their position by expanding into limited-edition sportswear lines that blend cutting-edge performance with signature aesthetics.

Lululemon's $150 yoga pants become surprise hit in slowing china. While other Western brands are fading, the Canadian yoga wear maker can’t expand fast enough on the mainland.

Lululemon Athletica (LULU) Year-To-Date Returns Could Reverse

Despite a 30% drop in its stock price this year, Lululemon has surpassed other global brands, becoming the third-largest international sportswear brand in China. The company's success is partly driven by a shift in Chinese consumer habits towards health and wellness, a category viewed as the new luxury, influencing consumer preferences for brands like Lululemon.

We could be seeing a bullish reversal if the earnings revenue beat estimates from international sales. This might be an opportunity to buy into this stock as it looks undervalued.

Lululemon Athletica (LULU) US Sales During Black Friday

Mastercard's SpendingPulse reported that Black Friday retail sales rose 3.4% compared with last year, not adjusted for inflation. Online retail sales increased 14.6% vs. last year, while in-store sales ticked up 0.7%, according to Mastercard. Data indicates that jewelry, electronics and apparel remain the top gift sectors for the holidays. Mastercard noted there was particular strength in e-commerce apparel shopping during Black Friday.

Lululemon (LULU) jumped about 4.27% since Black Friday with a strong move off its 200-day line. The athleisure retailer reports its Q3 results on 05 December 2024 after market close.

Technical Analysis - MACD and Multi-timeframe (MTF)

We are seeing LULU trading above the short-term and long-term MA, and MACD is also moving upside with a bullish crossover which happened recently.

We might need to see a stronger convictions from investors to give us a clearer signal on the MTF, as currently it is not a clear upward trend.

Summary

I would think LULU could give us an earning surprise if the international sales translate to a much better revenue contributor in the third quarter, and we could see that LULU strategy in China is also working to their advantage as athleisure has grown to become a dominant force in China’s sportswear market.

Appreciate if you could share your thoughts in the comment section whether you think LULU would be able to provide us with an earning surprise.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.