Athleisure apparel retailer Lululemon Athletica said on Monday that it narrowed its profit and revenue forecasts for the fourth quarter from net revenue of between $765 million and $785 million to between $775 million and $785 million, according to a company press release.
Q4 diluted earnings should be closer to between 99 cents and $1.01 per share, from its previous expectation of between 96 cents and $1.01 per share.
The narrower, more positive guidance comes on the heels of healthy holiday sales both in stores and online, according to Lululemon CEO Laurent Potdevin.
Lululemon is regaining ground in the athleisure apparel category that it almost singlehandedly invented through the development of technological fabrics and appealing designs.
The retailer in recent quarters has moved to introduce more non-workout apparel, preparing for what executives say is an inevitable burst of the ahtleisure bubble. Lululemon has also finally solved past quality and supply chain problems (and the attendant public relations debacle wrought by controversial founder Chip Wilson, now gone from the company).
“In our view, Lululemon has done three main things to help engineer growth,” Neil Saunders, CEO of retail research agency and consulting firm Conlumino, said in a note emailed to Retail Dive last year. “The first of these is product innovation ... Lululemon stumbled on the product front and seemed to lose momentum in terms of new designs and fabrication. However, it is now firmly back ... with new fabrics like Nulu (a lightweight, wicking, quick-drying, compression material) being added to assortments.”
Secondly, the retailer has invested heavily in customer service and experience, which has driven an "army of loyal fans," Saunders added. "The third positive area is fleet expansion, including more innovative approach like the company's smaller, local formats of 1,000 to 2,000 square feet. Not only does this help to mitigate the costs stores in an era of increasing digital sales, it also allows Lululemon to grow its influence in small but valuable communities, which it could not do with larger footprint shops."
Stiff competition in the space is likely to remain a challenge for Lululemon. Despite a seemingly late entrance to the space, Amazon last week rolled out plans for a private label athleisure line, and analysts say competitors should brace themselves for the e-commerce giant's presence.
“No matter the market, the challenge for brands in an increasing number of categories is that Amazon is the top online channel,” 1010data senior vice president of marketing Jed Alpert said in a statement emailed to Retail Dive. “Reasons for Amazon’s success across different markets vary. ... The bottom line for brands is they can no longer view Amazon as solely a channel and need to acknowledge Amazon as a competitor.”