Impressive boost in Lululemon sales

Canadian activewear retailer and manufacturer Lululemon has posted a 14 per cent uplift in total sales in the third quarter; same-store sales rose 8 per cent.

Kevin Wathey, a consultant with GlobalData Retail, says that while other players in the sports and athleisure market struggle, Lululemon sales continue to go from strength to strength.  

While income dropped by 14 per cent, the increase in sales by either measure underlines that Lululemon is still attracting new customers – and getting existing shoppers to spend more both online and offline, he said. The drop in profit was the result of asset impairments and restructuring costs associated with the Ivivva closedown, rather than symptomatic of any fundamental issues with the business. Excluding the exceptional $21 million of fees, net income rose by a healthy 17 per cent year on year.

“Exceptional items notwithstanding, the strength of Lululemon’s bottom line is mostly thanks to its ability to resist the temptation of excessive discounting – even in a market that has become steadily more promotional. In our view, this is made possible by the fact that Lululemon, unlike so many of its rivals, has a line-up of products that people want and for which they are prepared to pay full price. Constant innovation and a laser-like focus on functionality and quality are central to this,” said Wathey.

International growth – including in Asia – and product innovation should continue to fuel sales.

“The former is particularly helpful in driving revenue, and we remain excited about Lululemon’s prospects in both Asia and Europe. The latter gives the numbers a softer boost but also plays a critical role in keeping existing shoppers coming back for more. On the product side, we feel that Lululemon has some potentially significant wins ahead, especially in categories like footwear where it has just launched its first range of sneakers in collaboration with California-based Athletic Propulsion Labs.”

Wathey said he remained optimistic about Lululemon.

“It is true that the company has had a good run of growth and it is also the case that overall market conditions will continue to be challenging. However, Lululemon’s careful control of its brand, along with its efforts to position itself as a company that helps people achieve their lifestyle ambitions, will help it to speed through prevailing negative headwinds.”

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