Lululemon makes strides in menswear, boosts outlook after strong holiday

TORONTO — Lululemon Athletica Inc. has buoyed reports of a strong retail holiday season on with a hike to its revenue and earnings guidance.

The news came as the Vancouver- based athleticwear company presented at the annual retail ICR Conference in Orlando on Monday, where chief operating officer Stuart Haselden said the company has made strides in expanding its mens’ business. The company expects its menswear line will account for 25 per cent of its business by the time it hits an estimated US$ 4 billion in sales by 2020.

In addition to expanding its store base outside of North America, where it has 325 of its 388 stores, Lululemon has spent years diversifying into other sports such as swimming and cycling and built up a broad assortment for men. Once primarily a business based around women’s yoga pants and accessories, Lululemon is now more of a “dual- gender” brand, Haselden said. Sales in the retailer’s mens’ business rose 18 per cent in the third quarter.

Lululemon, which said last month that it saw an all- time high in traffic and sales on Black Friday and Cyber Monday in November, now expects fourth- quarter revenue to fall in a range of US$ 905 million to US$ 915 million compared with its early December guidance of US$ 870 million to $ 885 million. That’s a year- overyear boost of more than 15 per cent.

The company expects earnings of US$ 1.24 to US$ 1.26 per share, up from its previous forecast of US$ 1.18 to US$ 1.21. Lululemon raised its adjusted earnings forecast to between US$ 1.25 and US$ 1.27 per share. The company’ stock fell around 35 cents to US$ 79.09 on the Nasdaq in midday trading.

Prior to the update, analysts were anticipating adjusted profit of US$ 1.22 per shares in the period ending Jan. 28, according to Thomson Reuters. The Canadian retailer said its higher profit forecast excludes the impact of recent U. S. tax reform, and it anticipates taking a significant tax charge in the quarter related to one- time deemed repatriation tax on foreign earnings.

Lululemon also predicts fourthquarter comparable sales will be up in the high single digits on a constant dollar basis compared with an earlier forecast of a rise in the mid- single digits. Final fourthquarter and year- end results are due on March 27.

Given the growing power of Amazon and investor nervousness about bricks and mortar businesses amid the insolvency filing of Toys ‘ R’ Us and the closure of Sears Canada, market watchers have been eyeing retail reports for glimmers of optimism in the critical holiday quarter, which can account for up to 40 per cent of the year’s revenue in some businesses.

Kohl’s same- store sales for the 2017 holiday season climbed nearly 7 per cent from the same period a year earlier and the U. S. department store chain raised its fullyear profit outlook. Same- store sales were up 8.8 per cent, with a 9.1 per cent increase in the U. S.

Other retailers have shown a more tepid holiday performance.

Reitmans Canada said last week that same- store sales in the five weeks ended Dec. 30 rose 0.9 per cent and L Brands, which operates banners including Victoria’s Secret and La Senza, reported December same- store sales rose 1 per cent.