Retailer to close, rebrand Ivivva stores

Lululemon Athletica Inc. kicked off its biggest rally in almost six months after pulling out of a slump and announcing plans to revamp its line of girls’ apparel.

After slow sales spooked investors earlier this year — a problem that CEO Laurent Potdevin blamed on poor web traffic and a dull product assortment — the company posted first-quarter earnings that topped analysts’ estimates.

The improving results suggest that Lululemon is coping with a more crowded market for yoga pants and other forms of athleisure — the increasingly popular category that combines workout attire with casual wear.

“I’m excited to see the positive trends that materialized late in Q1 continuing into Q2,” Potdevin said.

The shares rose as much as 17 per cent to $56.85, the biggest intraday gain since Dec. 8. They had fallen 25 per cent this year before Thursday’s close.

Comparable-store sales fell two per cent in the quarter ending April 30 — less than the 3.4 per cent decline forecast by Consensus Metrix. E-commerce revenue was flat, the company said.

First-quarter earnings were 32 cents a share, excluding costs related to the restructure of its Ivivva children’s brand. That beat the 28 cents projected by analysts. The company also raised its fiscal 2017 forecast for profit while trimming its revenue forecast.

The retailer plans to close 40 of its 55 Ivivva stores while converting half of those to Lululemon stores. Ivivva will become “a primarily e-commerce focused business.”

Lululemon sees fiscal 2017 profit of $2.28 to $2.38 a share when excluding the cost of Ivivva’s restructuring, up two cents from its previous forecast. Including Ivivva-related costs, net income is seen at $1.97 to $2.07.

First-quarter sales rose five per cent to $520.3 million, compared with the $513.7 million analysts predicted. The retailer trimmed the full fiscal year forecast to $2.53 billion to $2.58 billion from $2.55 billion to $2.6 billion.

Lululemon is trying to attract more male customers and expand its presence overseas while competitors increase their reliance on discounts. The company’s website suffered a lengthy outage last month, a setback for a brand that’s been working on its online performance. The Vancouver-based company counts on direct-to-consumer sales for about 17 per cent of revenue, Macquarie analyst Laurent Vasilescu estimates.