Lululemon Athletica Inc. (NASDAQ:LULU) reported revenue for the second quarter that beat the estimates of surveyed analysts. Quarterly revenues jumped 14 percent to $514.5 million, slightly higher than the Zacks Consensus Estimate of $514 million. On a constant dollar basis, total revenue increased 15 percent. Adjusted earnings rose nearly 11.8 percent year over year. Second-quarter fiscal 2016 adjusted earnings were 38 cents per share, in line with the Zacks Consensus Estimate.
Overall comparable sales increased 4 percent, with in-store sales rising 3 percent and direct to consumer sales rising 6 percent. Sales were helped by a strong performance for the men’s business, which continues to grow faster than the overall business. Sales also improved for women’s tanks and bras.
Gross profit increased 20 percent to $254.2 million in the second quarter. Gross margins improved to 49.4 percent in the latest quarter from 46.8 percent a year ago, ending eight straight quarters of declines. Operating income rose 11 percent to $74 million. Lululemon exited the fiscal second quarter with cash and cash equivalents of $535.4 million and inventories totaling $277.3 million.
The company is continuing its expansion. The company opened six net new company-operated stores during the second quarter. Since the second quarter of last year, the company has added 43 net new company-operated stores. As of Jul 31, 2016, the company operated a total of 379 stores.
During the third quarter, the company expects to open nine new stores. For all of fiscal 2016, the company expects to open 42 stores, up from a previous guidance of 40 stores. With the new stores, the company will expand its total square footage by nearly 12 percent.
The company provided an encouraging guidance for the third quarter. For the fiscal third quarter, Lululemon anticipates revenues in the range of $535–$545 million and earnings in the range of 42–44 cents per share. In the third quarter of last year, the company reported earnings of 35 cents per share.
The company also raised its projections for fiscal 2016 earnings and sales. Earnings for the fiscal year are projected to be about $2.11–$2.19 per share, or $2.07–$2.15 on an adjusted basis. Earlier, the company had projected earnings of $2.08–$2.18 per share. For fiscal 2016, Lululemon projects sales to fall between $2.325–$2.350 billion. The company previously projected full fiscal sales in the range of $2.305–$2.345 billion.