Athletic pants, outerwear jolt Lululemon results in ‘the kind of quarter ... you frame and you replicate’

Sales surge quells worries about CEO exit

TORONTO Strong sales of athletic pants and outdoor jackets led to a robust fourth quarter at Lululemon Athletica Inc., evaporating any lingering market worries about the sudden departure of its CEO last month.

“Clearly it was a market-share gaining year across categories, across channels, across all geographies,” said Glenn Murphy, the former Gap Inc. CEO who was promoted to executive chairman of Lululemon in February from his prior role as chairman. The company bested analyst estimates and net revenue soared 18 per cent amid surging online sales.

Murphy applauded the retailer’s management team for sequentially improving results throughout the year after a disappointing first quarter of 2017. The fourth quarter, he told analysts on a call to discuss financial results, “is the kind of quarter you take, you laminate, you frame and you replicate.”

The quarterly numbers are a positive step given the abrupt exit of Laurent Potdevin from the role of the CEO at the beginning of the first quarter last month. Potdevin, who led the company for four years, left after breaching Lululemon’s code of conduct, the company said, with subsequent reports citing a relationship with a former employee.

Murphy said Tuesday that the board has met with a number of candidates for the position, and is confident that it can attract “a top global consumer executive” as CEO.

The Vancouver-based retailer reported profit of US88 cents per share for the period ended January 28 compared with US99 cents in the same quarter of last year. Adjusted earnings per share were US$1.33, compared with earnings of US$1 a year ago.

Revenue was US$928.8 million,

compared with US$789.9 million a year ago. That beat analyst estimates of US$911.42 million in revenue and per share earnings of US$1.27, according to Thomson Reuters.

Sales at stores open for more than a year rose 12 per cent, or 11 per cent on a constant dollar basis, with a two-per-cent rise in bricksand-mortar store sales and a 44-per-cent jump in online revenue. Analysts had expected samestore sales to increase 8.6 per cent excluding currency changes, according to Consensus Metrix.

Sales of women’s pants rose 19 per cent while men’s pants were up 21 per cent. Outerwear was also a strong category, with a doubledigit increase for women and a 20-per-cent sales rise for men. Stores will build on the momentum by carrying lightweight jackets for men this spring, executives said.

The firm also saw strong results in its so-called “co-located” store formats, expanded stores that include a deeper selection of menswear and future category extensions.

Chief operating officer Stuart Haselden said the company was able to drive up traffic in its stores through digital email marketing to consumers and converted more of its web browsers into buyers during the quarter.

Lululemon said it is on track to hit its 2020 revenue target of US$4 billion from US$2.65 billion in fiscal 2017.