Lululemon Gets Lift From Men's Business, Product Investments

By Maria Armental and Michelle Ma Features Dow Jones Newswires

Lululemon Athletica Inc., bucking a sales slowdown that has sent shock waves through the sector, raised annual financial targets following its performance in its latest quarter.

Continue Reading Below

The Vancouver athletic-apparel company said sales were strong across several categories and that it expected outerwear, a high-margin category, to perform well in the second half of the year.

Among the highlights in the most recent quarter, Chief Executive Laurent Potdevin said in a conference call, was the men's business, which Lululemon expects to account for more than $1 billion in annual sales by 2020.

"Men's is still one of our best-kept secrets," Mr. Potdevin said.

On Thursday, Lululemon, which is targeting $4 billion in sales by 2020, said it now expects sales in the current fiscal year to reach at least $2.55 billion.

Shares, down 12% this year, rose 4.6% to $60.20 in after-hours trading.

Continue Reading Below

In late March, when Lululemon offered a first look at what was then expected to be a weak year, company executives blamed disappointing sales on spring offerings that weren't bold enough. By then, company officials said they were adding more colorful clothes and were encouraged by a sales uptick.

In addition to rolling out products beyond its signature yoga clothing, Lululemon has said it is focusing on its digital and international businesses as well as pushing more products for men.

Same-store sales, a closely watched figure that strips the impact from recent store openings or closings, rose 7% in the latest period, ahead of analysts' projected 4.2% increase, according to FactSet.

Revenue rose 13% to $581 million, which also came in ahead of expectations.

Overall, Lululemon's second-quarter profit fell 9% from the year-ago period to $48.7 million, or 36 cents a share. Excluding costs tied to the restructuring of girls brand ivivva, profit edged up to 39 cents a share.

Mr. Potdevin said during the conference call that Lululemon's quarterly performance was helped in part by "community activations," including connecting with consumers through retail store events, live-streamed yoga classes, and sponsorships of running events.

Lululemon, which has been expanding internationally, said it had seen high demand, particularly in China, a key expansion area. Mr. Potdevin said the company is on track to open 12 stores in Asia this year.

Lululemon also announced on Thursday that executive vice presidents Gina Warren and Scott "Duke" Stump were leaving the company. The departures are notable as Ms. Warren, whom Mr. Potdevin said was leaving for personal reasons, led Lululemon's culture and talent departments. Mr. Stump, meanwhile, had been charged with reimagining the company's brand and building its community.

"While these changes are important," Mr. Potdevin said, adding, "the brand is stronger than any of us individually."

Write to Maria Armental at maria.armental@wsj.com

(END) Dow Jones Newswires

August 31, 2017 20:02 ET (00:02 GMT)