‘Testing grounds’ help Lululemon stretch sales
Testing out its technical sportswear in different climates has helped Lululemon Athletica boost its sales.
In markets such as Australia, business has been improved by focusing on so-called “brand and community” ambassadors who practise locally relevant sports, such as triathlon and surfing, chief executive Laurent Potdevin said Tuesday after the Vancouverbased apparel retailer released first-quarter results topping market expectations.
“They are training in an environment that is hotter and more humid,” Potdevin said during a conference call with analysts. “Obviously, they have to deal with a lot more sun than we do here in Vancouver.” Using different global markets “as a testing ground for new products has really paid off in a very significant way,” he said.
In addition to keeping close tabs on differing climate conditions in local markets, Lululemon has been playing with different store formats and sizes to roll out in parts of the world with different real estate needs, Potdevin said. In New York’s SoHo district, the retailer — which has been trying to increase its selection of menswear and sport-specific “technical” clothing, such as swimwear — operates side-by-side stand-alone men’s and women’s stores.
“In the right cities, we will continue to play with potential standalone stores as we see fit as long as it is in very close proximity to the women’s locations,” Potdevin said. “The one format that we are the most excited about right now is an expanded store where both men’s and women’s are located. Our female guest still shops a lot for him. We are seeing tremendous results (with that format).”
Lululemon raised its full-year revenue and earnings forecast after reporting better-than-expected profit as it continued to revive the business in the wake of its 2013 recall of overly sheer women’s pants.
Shares rose $6.75 US, or 10.97 per cent in New York trading, to close at $68.27.
In the first quarter ended May 3, profit rose to $47.8 million, or 34 cents per share, from $18.98 million, or 13 cents per share. Revenue rose about 10 per cent to $423.5 million.
Analysts on average were expecting a profit of 33 cents per share on revenue of $418.9 million, according to estimates from Thomson Reuters.
Total comparable store sales rose six per cent on a constant dollar basis compared with a one per cent climb a year ago.
After the solid results, the company raised its full-year earnings forecast to $1.86 to x$1.91 per share from $1.85 to $1.90, and its revenue forecast to $2 billion-$2.05 billion from $1.97 billion to $2.02 billion.
“Clearly the turnaround efforts are working,” said Dorothy Lakner of Topeka Capital Markets. “They are giving relatively conservative guidance, likely so they can beat it again.
“It’s still early in the year, so there is no reason to raise the bar too high.”
The company, which said its expansion efforts in Asia and Europe are exceeding expectations, opened 14 stores during the quarter for a global total of 316.
“We are very, very happy with the pace and the success of the international expansion so far,” Potdevin said.