Per Market Screener
Lululemon Unsold Merchandise Rose by 85% to $1.7 Billion
12/9/2022
Lululemon released its third-quarter results showing a massive amount of unsold merchandise. The company said it had an inventory balance of $1.7 billion by the end of the quarter on October 30.
The high inventory happened despite the recent Black Friday sale and the holiday shopping season is just around the corner. Lululemon CEO Calvin McDonald said this Black Friday became historic "in terms of revenue and traffic."
The CEO said Lululemon's top-selling products included its outerwear, belt bag, and footwear.
Lululemon reported $2.6 billion in current assets and $1.3 billion in current liabilities, and despite a massive 85% year-over-year inventory increase, the company isn't expected to slash prices. The sportswear company CEO gave a statement paired with stock analysis, per Business Insider.
McDonald: "Our inventory levels were too lean last year, and we made the strategic decision to build inventories this year, which enabled the strong top-line growth we have delivered,"
Despite its massive inventory, Lululemon still reported a 28% increase in quarterly sales, beating analysts' expectations. Although its quarterly sales were expected to be $1.81 billion, they came in at $1.86 billion.
McDonald also said that the company was able to jack up its product price by 10% in 2022, describing Lululemon as a "premium brand." To confirm, the CEO says he doesn't expect any additional price markups.
McDonald: "What we don't want to do is react too aggressively and create any impact on the demand for our product,"
Despite the massive inventory, Meghan Frank, Lululemon's Chief Financial Officer, still expects the inventory to sell out this quarter.
The Lululemon CEO shares his philosophy on the brand, believing it should remain a "premium brand" while comparing it to other companies that discount their prices. McDonald's points to different companies that discount their products heavily, which can reduce the perceived gain.
The CEO says he doesn't expect to drop prices just to drop its inventory.
McDonald: "Great products, regular prices is still selling,"
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