Q3 2023 Earnings: Lululemon VS. Restoration Hardware

In the third quarter of 2023, Lululemon and RH (Restoration Hardware) presented contrasting financial performances.

Lululemon's Q3 Performance

• Net Revenue: Increased by 19% to $2.2 billion, a significant sales growth.
• Total Comparable Sales: Increased by 13%.
• Gross Margin: Increased to 57.0% (adjusted to 58.1%), reflecting higher profitability.
• Direct to Consumer Revenue: Increased 18%.
• Gross Profit: Increased 21% to $1.3 billion.

CEO Comments: Highlighted strong quarter, innovative product offerings, and readiness for the holiday season.

CFO Comments: Expressed satisfaction with top and bottom line exceeding expectations.

RH's Q3 Performance

• Revenue: $751 million, at mid-point of guidance.
• Adjusted Operating Margin: 7.3%, slightly below expectations, suggesting cost management challenges.
• Challenges: Higher expenses, including international openings.

CEO Comments: Expects housing market to remain frozen until a drop in interest rates or home prices. Anticipates demand acceleration in the first half of 2024.

Comparing Lulu and RH:

• Performance: Lululemon showed a strong performance with significant revenue and profit increases, whereas RH experienced a more modest performance with revenue meeting mid-point guidance and a slight miss in operating margin.
• Market Position: Lululemon's growth is more robust, indicating strong brand resilience and market demand, while RH faces market challenges due to external factors like mortgage rates and geopolitical issues.
• Outlook: Lululemon appears optimistic but cautious about its future, with its strong position entering the holiday season. RH expects a challenging environment but foresees improvement in demand trends in the first half of 2024.
• We're seeing the broader market trends in the retail and home furnishing sectors.

Sources: Lululemon | Restored Hardware