Direct-to-consumer sales grow 27% at Lululemon in Q3

December 11, 2014 11:41 AM

Lululemon Athletica Inc., No. 112 in the Internet Retailer Top 500 Guide, increased its direct-to-consumer business—which consists mainly of sales online—27% in the third quarter of fiscal 2014 to $77.2 million. Direct-to-consumer sales accounted for 18.4% of total revenues. That’s an increase from 16.3% in the third quarter of 2013.

Comparable-store sales, which includes sales online and in physical retail stores, increased just 3% during the company’s fiscal third quarter, which ended Nov. 2. For the first nine months of fiscal 2014, same-stores sales increased just 1%.

The yogawear maker posted third quarter profit that topped analysts’ estimates. The company also raised its full-year forecast, saying more shoppers are buying workout clothing for everyday use.

Net income declined 8.5% to $60.5 million, or 42 cents a share, in the three months ended Nov. 2, from $66.1 million, or 45 cents, a year earlier, the Vancouver-based company said in a statement today. Analysts projected 38 cents, the average of 32 estimates compiled by Bloomberg. Lululemon raised its profit forecast to $1.74 to $1.78 a share from $1.72 to $1.77.

CEO Laurent Potdevin is working to capitalize on the growth of the so-called “athleisure” trend by adding more seasonal and fashionable items to its core assortment of yoga pants and workout staples. Lululemon is also trying to speed growth internationally and among male customers, which the company has said may be a $1 billion revenue opportunity. Lululemon opened its first stand-alone men’s store in New York last month.

“There’s more newness from the company than we’ve seen in a while,” Anna Andreeva, a New York-based analyst at Oppenheimer & Co, said in a telephone interview with Bloomberg News. “That’s what they need to be doing.”

“Product execution right now is much improved,” said Andreeva, who has the equivalent of a buy rating on the shares.

Founder Fight

Lululemon shares rose 9.2 percent to $51.01 at 9:32 a.m. in New York. The stock had fallen 21 percent this year through yesterday, compared with a 9.6 percent gain in the Standard & Poor’s 500 Index.

The company in August settled a fight with founder Chip Wilson, who had said he was unhappy with the direction the retailer had taken after he stepped down as chairman. As part of the deal, Wilson agreed to forgo pursuing a buyout of the company for at least a year and sell half of his stake to private-equity firm Advent International Corp.

Lululemon ran into trouble last year, when the company recalled its black Luon yoga pants because they became too transparent when the wearer bent over. About two weeks after the recall, the company said chief product officer Sheree Waterson was stepping down. Two months later, CEO Christine Day announced plans to retire.

Bloomberg News contributed to this article.




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