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Lululemon Net Increases As Sales Rise 84 Percent

Lululemon Athletica Inc. reported Thursday that third-quarter earnings more than tripled, continuing its growth trajectory since going public last summer,...

Lululemon Athletica Inc. reported Thursday that third-quarter earnings more than tripled, continuing its growth trajectory since going public last summer, and the yogawear company raised its guidance for 2007.

This story first appeared in the November 30, 2007 issue of WWD.  Subscribe Today.

For the three months ended Oct. 31, Lululemon said net income increased to $7.6 million, or 11 cents a diluted share, from $1.7 million, or 2 cents, in the same period in 2006.

Sales for the period climbed 84 percent to $66.1 million from $36 million, propelled by 27 new store openings and strong same-store sales in existing units. Lululemon has opened eight stores in the month since the quarter ended and plans to open three more in the fourth quarter, then 30 to 35 stores in fiscal 2008.

For the first nine months of the fiscal year, earnings increased 139 percent to $16.2 million from $6.8 million. Sales for the first three quarters grew 75 percent to $169.6 million from $96.7 million.

The Vancouver-based company also raised its guidance for 2007 to 40 cents to 42 cents a diluted share, up from 30 cents to 33 cents previously, assuming same-store sales growth of 20 percent or more annually.

Lululemon launched an initial public offering in July that raised $327.6 million, and shares are trading at more than double the $18 offer price. The stock was up $1.04 on Thursday to close at $41.54.

During a conference call, company executives said a controversy over the VitaSea line had not damaged purchases of the line, which represents about 1 percent of total sales. The New York Times reported this month that the VitaSea line did not appear to contain the seaweed benefits promoted on its educational tags and content label. The newspaper said it got a tip from a Lululemon investor, who was shorting the stock, and commissioned a separate lab test to compare the contents of a cotton J. Crew T-shirt with a VitaSea-line shirt. The test confirmed no significant difference in mineral levels but could not rule out the presence of seaweed entirely. The company has removed the health benefits claims from VitaSea tags.

“We stand behind the integrity of our product and processes, including VitaSea,” Bob Meers, Lululemon chief executive officer, said on the call.

 

The company has completed an analysis of its fabrics to insure that factories and suppliers are complying with specifications, Meers said.