Sales from new stores boosted Lululemon Athletica Inc.’s second-quarter revenues, but couldn’t stave off a decline in profits.
This story first appeared in the September 11, 2009 issue of WWD. Subscribe Today.
However, the yoga-inspired apparel company said it is readying for continued top-line growth this year by boosting fourth-quarter inventory plans.
“At the halfway point of 2009, we see solid signs of recovering our business momentum,” Christine Day, chief executive officer of the 115-door retailer, said on a conference call with analysts.
Net income for the quarter fell 17.1 percent to $9.2 million, or 13 cents a share, from $11.1 million, or 16 cents, a year earlier. The profit was 3 cents better than the 10 cents analysts projected. Shares were up 15 cents, or 0.7 percent, on Thursday to close at $21.76.
Sales for the three months ended Aug. 2 rose 14.3 percent to $97.7 million from $85.5 million, an increase the company attributed to 24 additional company-owned stores. On a constant-dollar basis, comparable-store sales for the Vancouver-based firm fell 2 percent.
Comps trends improved compared with the 8 percent drop in the first quarter, and Day said the company responded to the uptick by adding almost 800,000 units to the summer line. Gross margin dropped to 46.2 percent of sales from 51.9 percent a year ago, with a weaker Canadian dollar and higher air freight costs cutting into the figure.
Day said the company had seen a better flow of goods and reduced on-hand inventory at its stores.
“With our increased confidence in our sales momentum, we will rebuild our inventory levels for [the fourth quarter] to create the opportunity for positive comps,” she said, adding that the current quarter would be a transition period with flat comps. The company projected third-quarter earnings at 11 cents to 13 cents a share, straddling the 12 cents anticipated by Wall Street.
For the first half, earnings fell 19.7 percent to $15.8 million, or 22 cents a diluted share, from $19.6 million, or 27 cents, a year earlier. Sales for the six months advanced 10.5 percent to $179.4 million from $162.4 million.