Next month, Lululemon Athletica will open its first company-operated store in Zurich, Switzerland, along with a new shop-in-shop in London, accompanied by a major new promotion. The Canadian-based group opened a company-operated store for the first time in Seoul during the first quarter ended May 1. It also opened nine additional stores in the U.S. and in other parts of Asia and Australia, including a store in Singapore and a street-side “showroom” in Tokyo. It ended the quarter with 373 locations, up from 316 a year ago, plus 71 showrooms.
Lululemon raised its outlook for 2016 revenues, projecting that they will grow to a range of $2,310 million to $2,350 million, after they came in stronger than expected for the first quarter ended May 1. Same-store sales should go up in the mid-single digits on a constant-dollar basis.
In the latest quarter, the company's revenues rose by 17.0 percent over the year-ago quarter to $495.5 million, or by 19.0 percent on a constant dollar basis. Total comparable sales, which include comparable store sales and direct-to-consumer sales, increased by 6.0 percent, or by 8.0 percent on a constant dollar basis. Sales at existing stores rose by 3.0 percent - or by 5.0 percent excluding currency headwinds.
The gross margin lost 0.3 percentage points, down to 48.3 percent, largely due to unfavorable foreign exchange rates with the U.S. dollar, despite reductions in the cost of raw materials and air freight.
Lululemon posted a net profit of $45.3 million - down from $47.8 million a year earlier - and the operating margin dropped by 4.5 percentage points to 11.6 percent, largely due to net foreign exchange losses of $13.5 million caused by the revaluation of cash and receivables. They were $9.1 million higher than the net foreign exchange losses recorded in the first quarter of fiscal 2015.
Profitability was also impacted by consulting fees and higher expenses on digital marketing. However, the 5.2 percent drop in profit was lower than anticipated, leading to an improved outlook also in terms of earnings.
The company saw continued sales momentum across all channels and geographies. It highlighted a 21.0 percent growth in the men's category, which has been on the rise for six consecutive quarters. Global online sales also jumped by 18.0 percent.
Lululemon said its top priority for this year will be to strengthen and grow the women's category, specifically with a renewed focus on tops. Regarding the men's segment, it said it will continue to focus on product design, while also adding more dedicated square footage through store expansions.
