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Lululemon kicking in Q2, men’s and online ops star, raises outlook

Lululemon Athletica is fit, fit, fit! The Canadian athletic sportswear retailer delivered mostly upbeat news Thursday, with sales across all key categories strong, menswear racing ahead, online ops sprinting ahead, and the expectation that outerwear will perform well as H2 temperatures dip.

The company, with aspirations to become a $4bn business by 2020, also raised annual targets for the year, with sales expected to top $2.55bn. Its shares moved in the same direction after hours, up 6.8%.

Revenue rose 13% to $581m, ahead of expectations as same-store sales rose 7%, well ahead of analysts’ 4.2% call. Online sales soared 30% on a constant dollar basis.

OK, Q2 profit fell 9% to $48.7m/36 cents a share. Excluding costs tied to the closure of its girl’s brand Ivivva stores and the related restructure, profits edged down to 39 cents a share, topping analyts’ 35 cents.

Gross margin was 51.2%, an increase of 180 basis points on a year ago while adjusted gross margin was 51.6%, up 220 basis points.

“Our performance in Q2 and the solid momentum we are seeing in early Q3 gives me great confidence in our strategy and long-term plan,” said chief executive Laurent Potdevin.

Potdevin highlighted its men’s business which helped lift the overall performance, a category which Lululemon sees as a more than $1bn revenue business.

“Men’s is still one of our best-kept secrets,” he said, having seen a 23% growth in the most recent period in men’s pants and shorts.

Potdevin said in a conference call Lululemon’s quarterly performance was helped in part by “community activations” including connecting with consumers through retail store events, live-streamed yoga classes, and sponsorships of running events.

Lululemon raised its forecast, expecting $2.545bn-$2.595bn in full-year net revenue, up from its previous outlook of $2.53bn-$2.58bn, with comps rising in the mid-single-digit range. Full-year adjusted diluted earnings per share, excluding the impact of ivivva, was expected to range $2.35-$2.42.

Lululemon also on said Thursday executive VPs Gina Warren and Scott Stump are leaving the company. Warren, who is leaving for personal reasons, led Lululemon’s culture and talent departments. Stump, destination unknown, had been charged with reimagining the brand and building its community.


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