Lululemon revenue up as direct sales climb, results beat expectations
The company's plans for future growth in China, with e-commerce in the region growing more than 60% in the quarter
VANCOUVER – Lululemon Athletica Inc. plans to expand sales of its self-care line and loyalty program next year, as well as keep growing its so-called experiential stores as it looks to maintain strong quarterly earnings and revenue growth.
The Vancouver-based athleisure retailer recently launched a selection of house brand self-care products, including body lotion, dry shampoo, deodorant and lip balm. It sells these online and at 50 stores but plans to add more locations in 2020.
The company is also planning a broader roll out of its loyalty program, said CEO Calvin McDonald, on a conference call with analysts Wednesday after the company released its third-quarter financial results.
The program currently exists in Edmonton; Denver, Colo.; Austin, Texas; and Chicago Ill. For an annual fee, members receive a product, as well as perks such as expedited shipping on online purchases.
The company most recently started testing the program in Chicago, where it opened its first experiential store. At the store, customers can participate in exercise classes and dine at an eatery.
In the city, the connection between the loyalty program and experiential store boosts guest engagement, said McDonald, and the results across all guest metrics have been “very, very positive.”
Lululemon wants to keep building experiential stores. It opened its second such location at the Mall of America in Minneapolis, Minn. on Nov. 20 – just in time for the Black Friday shopping frenzy.
McDonald reiterated his vision that one day these types of stores will make up about one-tenth of the company’s store count. The company ended its most recent quarter, which finished Nov. 3, with 479 stores.
The expansion plans came as the company raised its financial forecast for its 2019 financial year as its most recent quarterly earnings results beat analysts’ expectations.
The company, which reports in U.S. dollars, said it expects net revenue of between US$3.89 billion and $3.91 billion for the full fiscal year, up from the $3.73 billion to $3.77 billion it had forecast in its first quarter.
Lululemon reported net income of $126 million or 96 cents per diluted share for the third quarter, up from $94.4 million or 71 cents per share in the same quarter last year.
Net revenue was $916.1 million, up from $747.7 million, as direct to consumer revenue increased 29% while total comparable sales increased 16 per cent.
Analysts had expected earnings of $122.3 million or 93 cents per share, and revenue of $899.7 million, according to financial markets data firm Refinitiv.
However, its outlook for the holiday season was a little below analyst expectations.
The retailer forecasts it will earn between $2.10 and $2.13 per diluted share in the fourth quarter. Analysts expect it will reach the top end of that guidance.
McDonald highlighted the company’s vision for future growth in China, noting the company’s e-commerce business in the country grew more than 60% in the quarter.
“We had a record-setting singles day in November where we surpassed the entire volume of last year’s event in just 69 minutes,” he said.
Singles day started in China on Nov. 11. It was originally started in the nineties by university students rebelling against Valentine’s Day, but has since been co-opted by commercialism and spread to retailers in other countries, including Canada.
The CEO said the company is monitoring events in Hong Kong closely, but has only seen a minimal impact on its overall business that has been offset by continued strength in the region.
Lululemon said on Dec. 9 that Stuart Haselden, its chief operating officer, would leave early in the new year. It also said it had begun an external search for the position of external vice president, international, to support its growth strategy to quadruple its international business by 2023.