Lululemon Athletica Inc. had a mixed start to the year and is planning to change up operations, including store closures.
The athleticwear brand posted first-quarter income from operations of $45.4 million, a decrease of 21 percent over the same period last year on net revenue of $520.3 million, a 5 percent increase. Total comparable sales fell by 1 percent.
Diluted earnings per share were 23 cents compared with 33 cents in the first quarter of fiscal 2016.
The results are generally in line with what the company projected in its end-of-year results, and chief executive officer Laurent Potdevin said at the time that 2017 was off to a “slow start.”
Lululemon isn’t waiting around for things to improve and has decided to operate its girls’ line Ivivva as “a primarily e-commerce-focused business” and to close 40 of the 55 stores dedicated to the brand.
While seven of the 15 remaining stores will be converted to Lululemon-branded operations, the restructuring cost the company about $17.7 million during the first quarter. The company also intends to close all of the Ivivva showrooms and “streamline” its corporate infrastructure, resulting in costs for the full year of between $50 million and $60 million.
The eight Ivivva stores set to remain open are in “key communities” in North America, the company said.
Potdevin said he’s “energized by the growth strategies taking shape” and that the plans for Ivivva “are the best means to operate this part of the business.”
“From our cadence of product innovation, to our enhanced digital experience, and first-ever global brand campaign, we have never felt more deeply connected to our guest or better positioned to expand our collective,” Potdevin added. “We remain laser-focused on owning our position as the global brand defining an active, mindful lifestyle.”
Looking ahead to the second quarter, the company expects things to improve. Net revenue is projected in the range of $565 million and total comp sales are expected to grow in the low- to mid-single digits.
As for the full year, Lululemon lowered its guidance slightly. The company now expects net revenue to hit a maximum of $2.58 billion and total comp sales to increase in the low-single digits. Previously revenue was projected at $2.6 billion.
For More, See: