Lululemon Athletica Inc. raised its guidance for the fourth quarter ending Jan. 29, to a range of 47 cents to 49 cents, up from its previous guidance range of 40 cents to 42 cents. Revenues are expected to come in the range of $358 million to $363 million in the quarter, compared to the company's previous guidance in the range of $327 million to $332 million.
In the year-ago quarter, Lululemon earned 32 cents on revenues of $245 million.
Comparable-store sales for the latest quarter are expected to reflect a low-to-mid twenties percentage increase on a constant-dollar basis. This compares to the company's previous guidance of low to mid-teens gains.
Speaking at the ICR Xchange investor conference last week, Christine Day, Lululemon's CEO, said the revenues gains came on full-price sales and strong gross margins.
“All year long, we have sold at over 95 percent,” said Day. She said the company expects that rate to “to drop a little bit” as inventory levels continue to improve. The retailer had been experiencing inventory shortages earlier in the year.
CFO John Currie likewise said that sales were driven by full-priced sales right up through Christmas, followed by “just modest clearance activity post-holiday and we'll end the quarter with an inventory position that is quite clean in terms of any aged inventory and a healthy inventory level coming into spring to service the Q1 expectations.”
With its robust comp rates, sales per square foot is estimated to reach $1,975 for fiscal 2011. Currie said that's driven by “strong increases in all age classes, in all regions in the United States, as well as our more mature markets in Canada.” E-commerce, just started in 2009, will represent slightly over 10 percent of revenues in 2011 and was close to 13 percent in the fourth quarter. Overall sales will grow just under 40 percent in fiscal 2011 with EPS ahead 47 percent.
Much of Lululemon’s presentation focused on its aggressive expansion plans. Lululemon added 37 new stores this year to close with 137. Management sees the opportunity to triple the size of its core chain.
“We believe there is potential for 350 stores in North America and we are only a third built out,” said Day. With a focus on opening showrooms to test and prime the market before opening an actual store, stores are opening at about $1,100 per square foot.
She declared Lululemon’s opportunity was to “become the number one women's athletic apparel brand.” She said the company’s vertical integrated retail model “sets us apart” from other athletic brands, mentioning Nike and Adidas, by giving the company “an opportunity to control our price points, our margins, our guests who we design to.”
She said LULU has a “very strong culture,” supported by its staff (called “educators”) and its in-store guest experience, “which is what we think is one of our other biggest differentiators.” Management empowers its staff by enabling them to do their all their own floor sets, visual merchandising, Facebook outreach, and local community programs. Said Day, ”Everything is actually set up so that that store manager really runs a small business and what we find is by being able to use their talents and hire people who can use their talents, they are really fully engaged and we get great productivity and we also compensate our people at about 75th percentile of the market.”
Beyond the Lululemon chain, future growth will come from e-commerce and its new Ivivva girls concept. Product-wise, customers at the Lululemon chain responded “exceptionally well to the robust assortment and bright color palette for holiday, and momentum continues with the new spring product offerings.” Day said the core focus right now is on run and yoga. She stated, “We want to take all the oxygen out of the space in those two areas. They are the growth categories from a guest perspective, but we are also laying a product and an innovation pipeline for the future.”
