What Recession? How High-End Lululemon Compares To Discount Dollar General, Walmart, Costco

Zinger Key Points
  • For all this talk of a looming recession, one would expect shoppers to cut back on high-end outlets like Lululemon.
  • In contrast, Dollar General is seeing a decrease in customer traffic, and reported worse-than-expected Q1 results.

Lululemon Athletica, Inc LULU shares spiked after the retailer reported 24% sales growth and raised its full-year guidance.

Shares of the athleisure company rose by 11.3% on Friday on the heels of an impressive first-quarter (Q1) earnings report, according to Benzinga Pro.

For the first quarter of 2023, Lululemon's success as a premium retailer was evident when it boasted a 24% surge in net revenue to $2 billion compared to the same three-month timeframe in 2022.

  • Net revenue increased 17% in North America, and roughly 60% internationally.
  • China, alone, saw revenue pop 79% in Q1.
  • Total comparable sales climbed 14%, or 17% on a constant dollar basis.
  • Comparable store sales enjoyed a 13% boost, or 16% on a constant dollar basis.
  • Direct-to-consumer net revenue increased 16%, or 18% on a constant dollar basis, and represented 42% of total net revenue compared to 45% for Q1 in 2022.
  • Gross profit increased 32% to $1.2 billion.
  • Income from operations increased 54% to $401.4 million.

See Also: Trading Strategies For Lululemon Stock After Q1 Earnings

How The High-End Fashion Brand Measures Up To Discount Outlets

Lululemon, which touts a total of 662 stores, seems to be bucking a trend. For all this talk of a looming recession, one would expect shoppers to cut back on high-end outlets and spend more at discount retailers.

That doesn't seem to be the case. Just hold up Lululemon to companies like Walmart Inc WMT, Costco Wholesale Corp COST and Dollar General Corp. DG.

Walmart

  • While Lululemon posted double-digit percentage gains, Arkansas-based Walmart had a more modest report and remains cautious for the months ahead.
  • The company reported Q1 sales of 7.8% on May 18. It also upped its expectations for the fiscal year, predicting 3.5% growth in consolidated net sales.
  • In terms of total revenue for the three-month period, Walmart expected about $149 billion, but reported more than $152 billion — just over $141.5 billion in 2022.
  • Same-store sales climbed 7.4% year-over-year. 

Costco

  • The big-box wholesale club saw sales growth slow in the fiscal 2023 3Q, reporting smaller net and comparable sales gains.
  • Total revenue of $53.65 billion was up from last year’s $52.6 billion in the same quarter, but missed a Street consensus estimate of $54.57 billion.
  • Costco also reported net sales of $52.6 billion. That's up just 1.9% year-over-year. And membership revenue for the period was up just 1.6%.

Dollar General

  • The Tennessee-based company is seeing a decrease in customer traffic, resulting in worse-than-expected Q1 results.
  • EPS decreased 2.9% to $2.34 and missed the analyst consensus of $2.38.
  • Dollar General also reported sales growth of 6.8% year-on-year to $9.34 billion, missing the consensus of $9.46 billion.
  • Net sales growth fell between 3.5%-5.0%, compared to its previous expectation of 5.5%-6%.
  • Same-store sales increased a paltry 1.6% compared to the first quarter of 2022.

Now Read: Lululemon Stock Draws Praise From Analysts - 'Ample Runway Growth'

Image: Shutterstock

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