Lululemon bests estimates with 'mindful approach' to quality
Lululemon on Thursday said that first quarter net revenue rose 25% to $649.7 million, or 23% currency neutral, beating the Zacks consensus estimate for $616.32 million.
Total comparable sales rose 20% (or 19% in constant dollars), as comparable store sales rose 8% (6% in a constant dollars), according to a company press release. Direct-to-consumer net revenue in the quarter soared 62% (60% in constant dollars).
Operating income rose 130% to $104.3 million as net income rose 141% to $75.2 million, the company also said.
Lululemon seems to be shrugging off the competition it's attracted, posting huge surges in sales and profit in the first quarter.
Speaking to analysts on Wednesday, CEO Glenn Murphy said that the retailer is deepening its engagement with loyal customers as well as attracting new ones through digital marketing efforts. "[T]he last three quarters have been a stepped-up performance for Lululemon when it comes to market share gains and that's market share gains in our stores and in e-commerce," he told analysts, according to a conference call transcript from Seeking Alpha.
The athleisure and activewear retailer is moving past rivals old and new with differentiated merchandise, and continues to command top premium prices with rare discounts, according to GlobalData Retail Managing Director Neil Saunders.
"Outside of the core fitness ranges, Lululemon is using its strong brand to drive growth in other categories like outerwear and gifts," he said in comments emailed to Retail Dive. "We believe the mindful approach, which is always concerned with how to combine great design with great function, has allowed Lululemon to both differentiate from rivals and persuade its customers to pay very full prices for its products."
Part of that digital marketing includes a vastly improved website, and website visits, dwell time and conversion rates are all up, according to GlobalData research. That may have sparked the e-commerce sales surge in the quarter, Saunders said, but added that the results wouldn't be possible without Lululemon's merchandising prowess. The retailer has moved well past last year's problems with quality and style misses.
"We remain impressed with Lululemon's product innovation, which is creating strong demand for garments that fit well, feel good, and have superior functionality," he said. "Lines like the Naked Sensation women's pants, the Flow Y bra, and new footwear ranges have all proved to be big hits. Equally, new spring color palettes and print designs have been well received and have stimulated purchases."
The company has now set itself up for some tough comparisons down the line, and consumers may not have quite the extra jingle that tax benefits and lower gas prices have plunked into their pocketbooks of late. But Lululemon is on pace to only grow market share, according to Saunders.
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