The new management of Lululemon Athletica, led by Laurent Potdevin, wants to push its international operations and play a stronger role in men's, which currently represent 13 percent of sales, after posting relatively poor results for the first quarter ended May 4. The Vancouver-based company reported a 60 percent drop in net income to $18.9 million for the period, due to tax adjustment of $30.9 million related to a transfer of cash from Canada to the U.S., on a sales increase of 11 percent to $384.6 million.
A 4 percent decline in same-store sales at Lululemon's physical stores was offset by a 25 percent increase in e-commerce, which came to represent 17.2 percent of revenues. Comparable store sales fell by 5 percent in Canada and rose by 2 percent in the U.S. The brand's first store in London is on track to generate sales of $7 million in its first year of operation, or 130 percent above forecast, in spite of the local competition from Sweaty Betty.
A second store is due to be opened in the U.K. during the current quarter. Overall, the company's updated international development program calls for the expansion of its foreign network of showrooms, which should cover eight countries by the end of this year. The network of overseas stores will be developed more significantly from 2016. Lululemon plans to have 20 stores in Europe and 20 in Asia by 2017, covering all the main regions. It has already opened five in the last year.
Lululemon's results show an increase in the gross margin to 50.9 percent of sales in the latest quarter from 49.4 percent a year ago, in spite of a 3.1 percentage point drop in product margins. Operating margins declined to 18.2 percent from 19.1 percent. The management has lowered its profit forecast for the full financial year but its sales forecast is a little better than before.
Meanwhile, Lululemon has announced approval of a $450 million stock repurchase program and John Currie, the current chief financial officer of Lululemon, has announced that he plans to retire at the end of this year. He plans to ski for 60 days, matching the number of years that he has so far spent in his life.
