Lululemon, known as one of the "three piece sets for middle-class women," has once again maintained high growth in the Chinese market. On August 30, Lululemon released its financial report, which showed that in the first half of 2024 (from January 28 to July 28, 2024), the net income of Chinese Mainland increased by nearly 40% year on year.
In recent years, lululemon has maintained a high growth rate of over 30% in the Chinese market. Behind this, in addition to the booming "she economy" both inside and outside the sports field, Lululemon has also put in a lot of effort in marketing, such as its presence in the recently concluded Olympic Games. At the same time, in order to strengthen its connection with consumers, it has also held summer music challenge activities, etc. In the process of doing these, Lululemon's brand and community cost expenses have also maintained growth.
Net revenue in the Chinese market increased by nearly 40%
Lululemon has released another transcript. According to the financial report, Lululemon had a net income of $4.58 billion in the first half of 2024, a year-on-year increase of 8.8%; The revenue for the second quarter (April 29, 2024 to July 28, 2024) was $2.37 billion, a year-on-year increase of 7.3%. Regarding this result, during the subsequent earnings conference call, Lululemon stated that its revenue was lower than expected.
In this situation, Lululemon has lowered its full year performance expectations, expecting net revenue to be between $10.375 billion and $10.475 billion, an increase of approximately 8% to 9%. During the previous 2023 earnings conference call, the company expected a year-on-year revenue growth rate of 11% to 12% for the 2024 fiscal year.
Lululemon's income is mainly composed of the Americas, Chinese Mainland and other regions in the world. Although Lululemon's overall income is lower than expected, the Chinese market still maintains a relatively rapid growth. In the first half of 2024, Lululemon's net income in Chinese Mainland was $620 million, a 39% year-on-year increase; The net revenue for the second quarter was 310 million US dollars, a year-on-year increase of 34%.
Calvin McDonald, CEO of lululemon, further shared the market performance of Chinese Mainland in the second quarter of the company's financial report conference. "The market in Chinese Mainland maintained a strong growth in the second quarter. We continued to expand new customer groups in stores and various e-commerce platforms, and attracted new customers with innovative product lines, omni channel operation models, and unique brand positioning. We also carried out activities in the community widely."
According to public information, lululemon is a professional sports shoe and clothing brand specializing in yoga, running, and other activities. It is known as the "harvester for middle-class women" and was born in Vancouver, Canada in 1998. In 2013, lululemon entered the Chinese market. Looking at Lululemon's performance in the Chinese market in recent years, it has been relatively strong. According to the financial report, from fiscal year 2021 (the year ending on January 30, 2022) to fiscal year 2023 (the year ending on January 28, 2024), the net income of the company in Chinese Mainland increased by 80.3%, 32.8% and 67.2% year on year, respectively, accounting for 7%, 7% and 10% of the net income, and the net income of Chinese Mainland increased to 13% in the first half of fiscal year 2024.
Regarding the strong development of Lululemon in the Chinese market, Lululemon stated during a earnings conference call, "The main reason is that the company's scale in China is still relatively small. As of the end of this quarter, it had 132 stores in mainland China. In addition, the company has adopted a very localized approach to its brand, building relationships through local fitness coaches, influential people, and some very unique activities, which have helped us establish awareness in the community
Cheng Weixiong, an independent analyst in the fashion industry and founder of Shanghai Liangqi Brand Management Co., Ltd., analyzed to reporters from Huaxia Times that "because the Chinese market is still different from the European and American markets, the European and American markets are relatively more rational and integrated. The Chinese market is relatively less rational because these sports specific brands are generally more lifestyle oriented and casual, penetrating different wearing scenarios. Therefore, it is understandable that they sell well in the Chinese market
Faced with the strong development of the Chinese market, Lululemon is also continuously increasing its investment in the Chinese market. At the financial report meeting, Lululemon said, "We are still excited about Lululemon's potential in Chinese Mainland. We expect to open 35 to 40 new stores in 2024, including 5 to 10 in the Americas, and the rest in the international market, mainly in Chinese Mainland."
Continuously increasing brand and community expenses
Lululemon has a deeply intertwined relationship with yoga. In recent years, the trend in the Chinese sports shoe and apparel market has been that consumer demand is constantly refining, and brands with obvious professional performance are becoming increasingly popular among consumers.
In this context, Lululemon, as the pioneer of yoga clothing, has benefited from the female sports consumption market dividend. According to the financial report, in the first half of this fiscal year, the company's women's products saw a year-on-year growth rate of 7.6%, with revenue accounting for 64%. Cheng Weixiong analyzed to our reporter that "although there are many so-called first tier yoga brands in China, there are still huge differences compared to lululemon. lululemon has a solid layout in the first and second tier markets in China, and its community marketing has become synonymous with yoga
At the beginning of its establishment, Lululemon positioned itself as a high-end brand without celebrity endorsements. It established its own community promotion and in the Chinese market, Lululemon also used community marketing to attract customers. The company recently completed its annual community event. On August 25th, the 2024 "Summer Music Challenge" national finals initiated by it ended in Beijing.
The reporter from Huaxia Times learned from the information provided by Lululemon that the Summer Fun Challenge is Lululemon's iconic annual community event, which has been held for the fourth consecutive year. Its aim is to invite guests to connect with each other, and the event schedule runs through the entire summer. In addition, at the recently concluded Paris Olympics, lululemon appeared as the official clothing partner of the Canadian Olympic delegation.
Behind all of this, Lululemon's expenses at the brand and community levels are also constantly increasing. According to the financial report, from fiscal year 2021 to fiscal year 2023, the company's brand and community costs increased by $37.6 million, $2.4 million, and $95.4 million, respectively. In the first half of fiscal year 2024, lululemon's brand and community costs increased by $16.1 million, primarily due to increased marketing expenses and brand activities.
Regardless of the global market, increasing brand awareness is always one of lululemon's biggest opportunities. We look forward to bringing our brand philosophy to a wider range of new customers, "Calvin McDonald said on the conference call.