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Lululemon Athletica Inc. is launching a membership program in the fall, just one of many plans the company laid out at this week’s analyst event to double annual revenue to $12.5 billion over the next five years.
It will be a two-tiered program, with the “essential membership” offering free perks such as monthly events. The program will also incorporate content from the at-home fitness system Mirror, which Lululemon
LULU,
acquired in 2020 for $500 million.
The paid program will cost $39 per month, along with the purchase of a Mirror device. A basic Mirror system was priced online at $1,345 on Friday morning.
Currently, Mirror offers more than 10,000 classes. On Thursday, Xponential Fitness Inc.
XPOF,
announced a partnership with Lululemon that will bring content from four Xponential brands to Mirror’s workout library, including Rumble, a boxing-based fitness brand, and YogaSix.
Users will also receive discounts for in-person classes at studios, have early access to new products, and more.
The membership program began as a pilot launched in 2018 in four cities across North America. Executives see the program creating stronger relationships with customers that will drive growth across the business. Over the next five years, Lululemon expects that 80% of customers will be a member of one of its membership tiers.
Other parts of the company’s plan to reach $12.5 billion includes a focus on core products to drive sales. Lululemon aims to double its men’s business, double digital revenue, and quadruple international revenue with an eye toward growing in China and opening the company’s first stores in Spain and Italy. The company is also expanding well beyond yoga into areas like tennis, golf and hiking.
Earnings per share growth is expected to outpace revenue growth.
“While we have become accustomed to Lululemon executing with unparalleled consistency in all sorts of market environments (pandemic, global supply chain issues, etc.) such that these targets were largely expected, we remind investors not to take them for granted as many of Lululemon’s competitors have stumbled over the past few years when Lululemon has excelled,” wrote BTIG in a note.
“Overall, we continue to view Lululemon as uniquely positioned to grow its business at a rate in excess of category growth as it methodically takes share of the $650 billion global addressable athletic market.”
BTIG rates Lululemon stock buy with a $491 price target.
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“We see multiple years of mid-teens-plus revenue growth and margin expansion complemented by share repurchases afforded by the capital efficient business model,” wrote Stifel in a note.
Stifel rates Lululemon stock buy with a $500 price target.
“While risk / reward assessment presumes ongoing strength, the bias remains to the upside and we continue to view Lululemon shares as a solid core holding for growth investors.”
Wells Fargo, which rates Lululemon stock equal weight with a $370 price target, expects the company to achieve the growth targets, given its history.
“While we have high confidence in Lululemon’s ability to execute (especially considering prior 2023 targets were achieved early and Lululemon has greater visibility to their business than most, especially in the resilient athletic category), valuation keeps us on the sidelines,” said Wells Fargo.
Lululemon stock closed at $363.66 on Friday. Shares are down 7.1% for the year to date, and have gained 7.4% over the last year.
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