Lululemon beats estimates amid athleisure concerns

Sportswear retailer Lululemon Athletica Inc. saw a 13 per cent boost in revenue in the second quarter and beat analyst estimates for the period as industry watchers eye the athleisure market for signs of softness.

The Vancouver-based retailer reported Thursday diluted earnings of US$48.7 million in the three months ended July 30, or US36 cents per share, compared with earnings of US$53.6 million (US39 cents). Excluding the impact of restructuring its Ivivva youth store operations, the retailer reported adjusted earnings per share of US39 cents. Analysts were anticipating earnings per share of US35 cents, according to estimates from Thomson Reuters.

Revenue rose to US$581.1 million, from US$514.5 million a year ago, and same-store sales including online operations rose seven per cent.

“I am excited by the momentum in our business as we enter fall,” chief executive Laurent Potdevin told a conference call with analysts after market close. “I have full confidence that we can deliver on our 2020 vision” of hitting US$4 billion in annual revenue, he said.

The results come as analysts are looking for signs that the trend of wearing athleticwear as fashion outside of the gym could be coming to an end.

Last week, analyst Christian Buss noted an uptick in online markdowns in the quarter, which could suggest the retailer was trying to get rid of excess inventory.

“We are concerned to see heavier levels of online apparel discounting relative to historical norms,” Buss wrote in a note to clients, not the norm for “a brand which has usually limited discounts to postholiday clearance activity.”

Online revenue rose 29 per cent in the period as it held an online warehouse sale. Excluding the sale’s impact, direct to consumer net revenue rose 15 per cent.

“The decisions and when we make decisions to hold warehouse sales are really driven by our inventory position,” chief financial officer Stuart Haselden told analysts. “We don’t do it as a revenue driver … and we don’t want to train our guests to wait for them,” he added, noting the retailer does not plan to hold such sales at set intervals.

Lululemon recorded pre-tax costs of US$5.4 million in the second quarter related to the Ivivva restructuring.