Lululemon raises sales, profit guidance on strong holiday sales

Dive Brief:

Lululemon Athletica on Monday raised its fourth quarter net revenue and earnings estimates for fiscal 2017, which ends Jan 28. The company now expects annual net revenue in the range of $905 million to $915 million, up from previous guidance of $870 million to $885 million. That beats the Thomson Reuters IBES expectation cited by Reuters for $883.8 million.
The lift comes as the athleisure brand reported strong holiday sales. The company now expects same-store sales in the quarter to rise in the high single digits on a constant dollar basis, up from its previous expectation for a mid-single digits increase, according to a company press release.
The company also said that fourth quarter diluted earnings would range between $1.24 per share to $1.26 (up from $1.18 to $1.21), or, (excluding the impact of restructuring its ivivva operations) adjusted diluted earnings will range between $1.25 per share to $1.27 per share, up from $1.19 to $1.22. Thomson Reuters IBES analysts were expecting adjusted profit of $1.22 per share.

Dive Insight:

Lululemon is doing especially well in women’s and men’s pants, and its sales are growing more online than off, but its performance is fairly impressive in all categories as well as in stores, according to a note from Cowen & Co. analysts led by Oliver Chen emailed to Retail Dive.

The athleticwear maker — which once seemed in danger of ceding much ground to emerging competition in the athleisure segment it innovated — appears to have recovered quite nicely.

"Compared to years prior, the diversification of fabrics is impressive to us, and we believe Lululemon's ability to offer fabrics that serve various purposes and offer different technical innovations allows women to buy multiple fabrications of the same silhouette (a pant for yoga, a pant for spin, a pant for run, etc.)," Chen and his team wrote. "Further, many silhouettes are now online in extended sizes and lengths, and stores have the ability to sell the full-assortment but house the inventory online."

Lululemon's guidance lift was the second in weeks. The company had also raised its guidance last month, when it reported that third quarter net revenue rose 14% (12% on a constant dollar basis) to $619 million. The company also said then that overall same-store sales rose 8% (or 7% on a constant dollar basis) — as same-store sales in stores rose 2% (1% on a constant dollar basis) and direct-to-consumer net revenue rose 26% (25% on a constant dollar basis). However, net income in the third quarter fell from $68.3 million a year ago to $58.9 million, in part to due the expense of restructuring its ivivva kids unit.

The company, which has predicated its sales on well designed stores that often include space for yoga classes, has amped up its online operations for both sales and fulfillment. Last month, Lululemon CEO Laurent Potdevin predicted "a billion dollar digital business" by 2020.

The question now is whether Lululemon can continue its pace. On Tuesday, Potdevin said that it will. "We are thrilled with our performance this holiday season that reflects an accelerating trend across all parts of our business, and we look forward to continued momentum in 2018 and beyond," he said in statement.