Lululemon Athletica Inc. mostly held its prices over the key holiday season even as most fashion retailers rushed to slash.
Chief executive officer Laurent Potdevin stunned the investment set at the ICR Conference late Tuesday by noting: “If you think about our revenue between Cyber Monday and Christmas Day, we did 90 percent of our business at full retail. And quarter to date, including Black Friday, Cyber Monday — that number hovered around 85 percent.”
Lululemon seems to have emerged from the transition of a founder-based company to a shareholder-centric company. It has largely recovered from the product quality stumbles and negative press about sizing. The competition has also increased tremendously as multiple new fitness brands have emerged to try to take market share, but so far, the company has effectively fought back.
The company raised its guidance for the fourth quarter to a range of 78 cents to 80 cents from the 75 cents to 78 previously projected. Revenue for the fourth quarter is now expected to range from $690 million to $695 million, up from the previous guidance of $670 million to $685 million. That sets the company up for a year-to-year sales increase of about 15 percent for the quarter. The company conceded that it had given conservative guidance after sales declined in September, but that the top line recovered quickly.
“We had a very successful holiday season driven by strong execution in stores and online during the key holiday weeks,” Potdevin said with the financial update. “We are looking forward to 2016 and will enter the year with a very strong leadership team across the company that is relentlessly driving our strategic priorities and long-term vision.”
At the conference, the Potdevin said that Asia was “far exceeding their expectations,” while Europe was taking more time to build. Europeans, it seems, need a little more time to become acquainted with a new premium brand. The business there is just “on track.”
Lululemon isn’t focused on store count at this time, but is instead expanding its successful stores. The company is just now beginning to build a seamless omnichannel approach. “Digital was never really a huge focus for the company,” said Laurent, adding that the brand has tremendous online business that can be optimized.
Feeling the heat at ICR was Stage Stores, which has suffered from a customer base hurt by low oil prices and stores near the Mexican border that were impacted by the strong dollar. Michael Glazer, president and chief executive officer of Stage Stores, though, felt that other retailers were sympathetic to the challenging environment. “The environment just gets tougher and tougher,” said Glazer.
He noted the best categories for the store during the holiday were non-apparel related. Homes, cosmetics and footwear were the best with some good results from women’s active wear. He complained that “Wall Street has tended to strongly dislike Stage Stores at this point. They can’t stand the sector we’re in, that means department stores. Just on everybody’s hate list so to speak.” Dana Telsey of Telsey Advisory Group who was interviewing Glazer gently reminded him that, “Things could change quickly. Comps make things look a lot better.”
Stage Stores, which saw its stock drop about 60 percent last year, is closing 90 stores — with 20-22 to close this year — and remodeling others. The company plans to improve its mobile digital experience and is also opening Ralph Lauren shops with its stores and noted that Nike has been a strong brand for them.