Lululemon Athletica on Tuesday reported that fourth quarter net revenue rose 18% to $928.8 million as total comparable sales rose 12%, according to a press release.
Comparable sales at stores rose 2% during the period. Direct-to-consumer net revenue rose 44%, according to the release. Gross margin expanded 210 basis points compared to Q4 last year to 56.3%, and adjusted gross margin expanded 200 basis points to 56.2%.
Income from operations rose 30% from the year-ago quarter to $256.3 million. Net income, which included a $137.7 million tax expense in Q4 that stemmed in part from last year's tax bill, came to $119.8 million, down from $136.1 million in the year-ago period. Pre-tax income was $257.5 million, up nearly 40% year over year.
Lululemon on Tuesday didn't sound like a retailer missing its chief executive, who was ousted last month amid allegations of inappropriate behavior with a subordinate.
Its robust Q4 demonstrated that the athleisure seller has plenty of momentum. Even the company's website has been freshened up, with more appealing imagery, faster load times and better navigation, which management said helped achieve a 42% increase in e-commerce in the quarter.
The company has also put behind it the bland fashion missteps of a year ago. "[W]e really saw a nice turnaround based on our balance of color and pattern," said Sun Choe, senior vice president of merchandising, who now heads product development, design, innovation and merchandising in Laurent Potdevin's absence. A variety of silhouettes is driving a turnaround in tops that will continue, she added, according to a conference call transcript from Seeking Alpha.
Seasonal pop-ups at the holidays brought Lululemon not just sales but new customers, with 40% of customers shopping in seasonal stores new to the brand, according to Stuart Haselden, chief operating officer and chief financial officer. The company ran 24 pop-ups in Q4 and kept open a number of them into the first quarter, he told analysts, adding that the plan is to more than double that this year.
Lululemon is still developing new fabrics and products, including in the company's growing men's business, which "are providing powerful tailwinds in our assortments," Haselden also said.
Although executives think the company is behind in technology, it will try to right that, and overall e-commerce is expected to be a pillar of growth, Haselden said. So is Lululemon's international business, with accelerating store growth in Asia and Europe, he added.
As the company expands, its margins are somewhat depleted, warned analysts at Boston-based Trefis. But the company's momentum, plus its ability to get full price despite its premium price tags, are protecting it well.
"Lululemon's stores are usually known for keeping low inventory of new products and quick turnover of said inventory," the analysts said in a note emailed to Retail Dive. "This means that customers loyal to the brand are generally aware that if they like a product, they better purchase it right away because it might not be there the next time they visit the store."
That, with lack of discounts, means customers typically pay full price, Trefis analysts added. Also helping the company is a trend toward fitness and healthy lifestyles.
"If these trends continue, consumer spending on such products is likely to rise, and in that environment a company with a unique retailing strategy, and a loyal customer base like Lululemon, is likely to benefit," the analysts said.