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Streetwear Boosts Lululemon Profits

Lululemon | Source: Lululemon
By
  • Bloomberg

NEW YORK, United States — Lululemon Athletica Inc., the yogawear maker that ended a dispute with its founder last month, raised its full-year forecast after reporting second-quarter profit that exceeded analyst estimates.

Net income declined to $48.7 million, or 33 cents a share, in the three months ended Aug. 3, from $56.5 million, or 39 cents, a year earlier, the Vancouver-based company said in a statement today. Analysts projected 29 cents, the average of 33 estimates compiled by Bloomberg. Lululemon raised its forecast for the year by a penny to $1.72 to $1.77 a share.

Chief Executive Officer Laurent Potdevin is working to add more seasonal and fashionable items to the company's core product mix of yoga pants and other workout staples to reignite sales. Lululemon also is trying to speed up growth overseas and in men's apparel after a fight with founder Chip Wilson that ended with Wilson selling half his stake in the company to private-equity firm Advent International Corp.

“The design team has strayed away from its core competency in activewear and expanded into streetwear, most recently including the &go line, debuted in March,” Robert Drbul, a New York-based analyst at Nomura Securities, wrote in a note to clients before the earnings were released. “The line appears to be gaining traction, with success in pieces such as the ‘Here To There Dress.’”

While revenue rose 13 percent to $390.7 million in the second quarter from a year earlier, total comparable sales were flat on a constant currency basis, held up by a 30 percent increase in “direct to consumer” revenue.

CEO Pleased

“We are pleased to be on track with the implementation of our strategic road map, and are starting to see the results of our work across product, brand and international expansion,” Potdevin said today in the statement.

Last month, Wilson agreed to sell half his stake in the retailer to Advent for $845 million and to forgo pursuing a buyout for at least a year. The deal ended a fight between the board and Wilson, who had voiced dissatisfaction with the company’s direction after stepping down as chairman.

Lululemon ran into trouble last year when the company recalled its black Luon yoga pants because they became too transparent when the wearer bent over. About two weeks after the recall, the company said Chief Product Officer Sheree Waterson was stepping down. Two months later, CEO Christine Day announced plans to retire.

Lululemon shares fell 0.8 percent to $38.39 at the close of New York trading yesterday. The stock has fallen 35 percent this year through yesterday, compared with an 8 percent gain in the Standard & Poor’s 500 Index.

By Lindsey Rupp; editors: Nick Turner, David Risser, Bruce Rule, Thomas Mulier.

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