Lululemon raises outlook as profit beats, but store traffic slips
By Solarina Ho
TORONTO (Reuters) - A jump in online sales helped yogawear chain Lululemon Athletica Inc (LULU.O: Quote) report a higher-than-expected quarterly profit on Thursday, mitigating some of the damage from a series of mishaps last year, while spurring it to increase its full-year earnings forecast and pushing its stock higher.
Lululemon shares jumped as much as 18.5 percent to $45.49 on Nasdaq. The stock had fallen more than 40 percent in the last 18 months following an embarrassing recall of yoga pants that were deemed too see-through.
Since then, the Canadian company has worked to improve quality and solve supply-chain problems. It has also faced increased competition, addressed executive departures, fought lawsuits and sought to soothe disgruntled customers after controversial comments by founder Chip Wilson about some women's bodies being unsuitable for Lululemon yoga pants.
"The results ... today are beginning to reflect the ongoing work that is being done across our entire organization," Chief Executive Laurent Potdevin told analysts on a conference call. "And our sales and bottom line for the quarter finished slightly ahead of plan."
In a push to revive the sales growth that once made it an investor darling, the company has been stepping up expansion both in North America and abroad. Executives said the company, which now operates 270 stores, plans to open its first men's-only store, in New York City, and its first full-line Asian store, in Singapore, before yearend.
It recently opened some 90 showrooms, or test boutiques that are slimmed-down versions of its established stores, a quarterly record.
Chief Financial Officer John Currie said its Asian showrooms were doing "much better" than the showrooms it opened in the United States several years ago. That U.S. push had led to a long stretch of double-digit sales growth.
"I am a little bit cautious, in terms of wanting to see them grow at a prudent rate ... but I know the international story is the one that many investors have been eager to hear more about," said Liz Dunn, an analyst at Macquarie Research. Continued...