To The Moon

$Lululemon Athletica(LULU)$ released its Q3 financial report for 2022 as of the end of October. Although its revenue and profit level were slightly higher than expected, it still plunged 9% after hours because investors had strong expectations for the next holiday season and the company's guidance showed weak.

As far as Q3 is concerned, LULU is also an optional consumer industry.

• Revenue was 1.857 billion US dollars, a year-on-year increase of 28%, slightly higher than the market expectation of 1.816 billion US dollars; If in the original currency, it will increase by 25% year-on-year;
• The North American market increased by 26% year-on-year, and the international market increased by 41% year-on-year;
• Comparable sales in the same store increased by 22% year-on-year, higher than the market expectation of 15.3%; DTC sales increased by 31% year-on-year, higher than the market expectation of 22.9%.
• The gross profit margin was 55.9%, slightly lower than the market expectation of 56.7%, but the operating profit was 350 million US dollars, a year-on-year increase of 37%, exceeding the market expectation of 349 million US dollars;
• The diluted EPS was $2, up from $1.44 last year.

It is worth mentioning that the performance in China increased by 70% year-on-year, which is also the result of the company's crazy new stores in China since last year. The offline business of Q3 China is more or less affected by the epidemic, which does not hinder the demand of domestic consumers for yoga products.

It can be seen that the impact of raw material cost is still there. After all, the previous raw material inventory was bought at a high price. At the same time, the company's good operation management also enlarged the operating leverage, so the reduction of other expenses also paved the way for the improvement of profit margin.

At present, the business recovery in China is good, but it actually has strong growth capacity. However, the company is more conservative, in fact, it is still expecting the "recession" in North America in the next few quarters.

Company Q4 guidelines are

Revenue was 2.605-2.655 billion US dollars, lower than the market expectation of 2.66 billion US dollars; The diluted EPS was $4.20 to $4.30, which was also lower than the market expectation of $4.3.

The company will also make certain provision due to the impact of foreign exchange, but the current decline of the US dollar index may theoretically make Q4 relatively favorable. Earlier, some retailers warned that the demand in this shopping season might be weaker than before, which is one of the reasons for the company's cautious guidance.

In addition, the 9% drop after hours is actually some feedback from the 25% increase in the previous two months. The overall trend of LULU is much stronger than the broader market.