Q4 Preview: Lululemon's Double-Digit Sales Growth Set to Continue

The spotlight of the quarter is on the expanding men's product line, which analysts expect the company will report a year-over-year revenue increase of 15% in the fourth quarter—marginally higher than the 14% growth seen in women's products. The company is expected to build on this trend, with men's products forecasted to grow by 18% in the first quarter of fiscal year 2025, substantially outstripping the anticipated 12% increase in women's products.

Lululemon has achieved high appeal among women, yet brand awareness among male remains relatively low. With the development of new men's product offerings, Lululemon considers the men's line to be a crucial part of its future growth strategy. If the Q4 earnings reveal men's growth that surpasses expectations, this could signal a promising direction for the company and bolster investor confidence.

"We anticipate that the international region will be the primary driver of Q4 sales growth as it benefits from ongoing unit expansion and recovery of China," UBS analysts wrote in a note.

While LULU's core North American market remains strong, its international business has been a standout, with revenue growth of 60% in Q1, 52% in Q2, and 49% in Q3. Sales in China are expected to leap by 58% to $310 million in Q4, and sales from other international regions are also projected to rise by 52% to $287 million.

Despite Lululemon's strong presence in North America, there's considerable room for growth internationally, where brand awareness is still in its infancy. With international sales currently under 25% of total revenue, the company has its sights set on achieving a more balanced 50/50 split between North American and international markets, so the growth numbers for international regions are encouraging for investors.

Looking at past earnings, LULU has beaten the consensus revenue number in seven of the eight quarters over the past two years. The one miss was a very minor shortfall of $3 million miss in Q4 of 2022 on $2.13 billion in revenue.

For EPS, the company has beaten estimates each of the past eight quarters, with its smallest beat being 4 cents in Q3 of fiscal 2023 and its largest being a 34% beat in Q2 of 2023. That quarter it saw a strong 25-cent earnings beat.

With the strong performance, LULU's stock has generally responded well to its earnings reports and guidance with the stock rising the next session in 8 of the past 10 quarters. More recently, the stock has risen in the past four quarters following earning releases.