9/12/13

Direct-to-consumer sales increase 39% for Lululemon in Q2

The web accounts for 23% of Q2 growth for the athletic apparel retailer.

Katie Evans , Managing Editor, International Research

Fitness enthusiasts bought a fair share of workout gear from Lululemon Athletica Inc. in the past few months, and they bought much of it online.

The retailer, No. 122 in the Internet Retailer Top 500 Guide, reported strong year-over-year web sales growth for its fiscal second quarter ending August 4.

For fiscal Q2 the retailer reports:

• Direct-to-consumer sales, mainly online sales, increased 39.5% year over year to reach $49.4 million from $35.4 million in the second quarter of 2012.

• Direct-to-consumer sales accounted for 14.3% of total company revenue compared with 12.5% a year earlier, and 22.6% of the retailer’s revenue growth in the recent quarter.

• Total net revenue increased 22.0% to $344.5 million compared with $282.6 million in fiscal Q2 2012.

• Comparable-store sales for the first quarter increased 8%, compared to a hike of 15% for the same period a year earlier.

• Gross profit for the quarter increased 19.4% to $186.0 million from $155.8 million a year earlier. As a percentage of net revenue, gross profit decreased to 54.0% for the quarter from 55.1% in the second quarter of fiscal 2012.

• Income from operations for the quarter increased 12.5% to $79.0 million from $70.2 million and as a percentage of net revenue was 22.9% compared to 24.8% in the second quarter of fiscal 2012.

• Net income decreased slightly to $56.5 million compared with net income of $57.2 million in the second quarter of fiscal 2012.

For the first two fiscal quarters, the company reports:

• Direct-to-consumer sales rose about 40% year over year to $103.4 million from $73.9 million in the first two fiscal quarters of 2012.

• Direct-to-consumer sales accounted for about 15.0% of total company revenue compared with 13.0% for the same period a year earlier and 24.2% of growth for the first half of the fiscal year.

• Total net revenue increased 21.5% to $690.3 million compared with $568.3 million in the same period in 2012.

• Comparable-store sales increased by 8%, compared with a hike of 20% a year earlier.

• Gross profit increased 14.0% to $356.7 million from $313.0 million a year earlier. As a percentage of net revenue, gross profit was 51.7% compared to 55.1% in the first two fiscal quarters of 2012.

• Income from operations increased 1.1% to $144.9 million from $143.3 million, and as a percentage of net revenue was 21.0% compared to 25.2% in the same period of fiscal 2012.

• Net income was $103.7 million, about the same as net income of $103.9 million a year earlier.

The company ended the quarter with 226 stores in North America and Australia, compared with 189 stores in the two regions a year earlier.

 “We have not only worked our way back from the black luon setback, but have also added talented people in important functions and have taken major steps forward on a number of key fronts including the expansion of our international and men's businesses,” says Christine Day, CEO.  “We are well on our way to finishing 2013 as a much stronger company than when the year began. I am confident that the leadership currently in place coupled with a new CEO will have tremendous success leveraging the platform for growth.”

Day announced in June she will be stepping down as CEO, three months after the company announced in March it was recalling defective black luon yoga pants for being too transparent across consumers' backsides. The retailer took a hit as it had to work with its manufacturer to fix the material problems, issue refunds to consumers and pull the popular luon pants line off shelves for nearly three months.

While some Lululemon consumers may have encountered trouser troubles during workouts at their local gyms, Lululemon is working to ensure their customers at least won’t stink. The retailer announced in its earnings it has signed a deal with Noble Biomaterials, manufacturer of fabric with X-Static technology, which is designed to provide odor protection by inhibiting the growth of bacteria on the surface of fabrics. The agreement makes Lululemon the exclusive reseller of fabric that uses the technology.

“Noble has been a longstanding partner of Lululemon, providing its X-Static technology for our Silverescent fabric since 2005,” Day says. “This unique opportunity allows us to continue to innovate our technical product with X-Static and secure our leadership position in anti-stink athletic apparel.”

X-Static is made with 99.9% pure metallic silver. The silver fiber is woven directly into the garment and will not wash out over time, Lululemon says.

Topics:

athletic apparel, Christine Day, e-commerce sales, LuLuLemon, Q2 earnings, Top 500

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