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Athletic apparel company Lululemon Athletica, best known for it's yoga gear reported better than expected first quarter earnings sending the stock to all time highs. $LULU business is high margin, accelerating and expanding in new lines, online sales and in China.



Lululemon Pose

$LULU has successfully crafted out a niche for itself as a North American sports apparel brand in a very crowded marketplace, Nike remains the dominant player in the athletic apparel space with Adidas popular with teens and millennials.

Earnings

AprQ non-GAAP EPS surged 72% yeay over year to $0.55 ahead of prior guidance of $0.44-0.46. Revenue rose 24.9% year over year to $649.7 mln, also above prior guidance of $612-617 mln.

Lululemon Athletica inc. NASDAQ: $LULU

Reaction - $122.19 USD +17.14 (+16.32%)

Close: Jun 1, 2018

Highlights

  • Adjusted operating margin was 16.1%, an increase of 400 basis points year over year.
  • Total store comps rose +20% (+8% for in-store comps and +62% for direct-to-consumer, online comps).
  • LULU  “Out of Mind”  in the men's line which is now offered in three styles and is performing extremely well into Q2 (Jul).
  • LULU launched its City Sweat franchise for men, which includes a collection of hoodies and joggers made from its technical French Terry fabric.
  • LULU success of Enlite, sees new styles with varying levels of support in the bra category.
  • In Q1, LULU launched the Speed Up Bra featuring a new molded technology and the company has additional styles ready to introduce later this year.
  • LULU Embrace movement collection, due to launch in the fall. This will be a technically driven line of bottoms for women and men offering zoned compression, fully leveraging LULU's ongoing work as part of the “science of feel”.

International Strategy

Asia

  • Asia leads the way in Q1 LULU with combined comps over +50% with particularly strong results in China.
  • $LULU successfully opened its third and fourth stores in Seoul, Korea with the most recent opening in the iconic Lotte World Mall.
  • LULU expects to open 15 to 20 stores in Asia in 2018 and plans to launch a local e-commerce site in Korea later this year.

Europe

  • In Europe $LULU saw strong growth with double digit comps exceeding internal plans.
  • Recent store openings in Berlin and Frankfurt
  • $LULU added to its presence in the UK with a new store in Guildford outside of London.

Chief operating officer Stuart Haselden said on the conference call Thursday night, “We remain focused on solving problems for athletes, and we are a performance-oriented apparel business. We're being pulled into these categories versus pushing our way into them.” 

Outlook

  • Guidance for Q2 (Jul), LULU expects EPS of $0.46-0.48, which is above market expectations,
  • $LULU expects revenue of $660-665 mln, also above market expectations.
  • For the full year, $LULU sees EPS of $3.10-3.18 and revenue of $3.040-3.075 bln.
  • On the conference call, LULU said that there is momentum across the core areas of its business in channel, product, and guest engagement.
  • LULU remains firmly on track to achieve its ambition of $4 bln in revenue in 2020.

New CEO

In early February, lululemon's CEO Laurent Potdevin resigned, effective immediately. On the call, LULU said they have  met with a number of candidates who are both qualified and interested. The whole board together next week will be discussing the candidates.

About Lululemon

$LULU sells a full line of apparel and accessories including fitness pants, shorts, tops, and jackets designed for athletic pursuits such as yoga, running, general fitness, and dance-inspired apparel.

LULU is based in Canada but has significant operations in the US as well as a smaller presence in Australia, the UK, New Zealand, China, Hong Kong, Singapore, South Korea, Germany, Puerto Rico, and Switzerland.

Overall, LULU operates approximately 400 lululemon stores, about 70% of which are in the US. ItIts apparel is marketed under the lululemon athletica and ivivva athletica brand names.s primary target customer is a sophisticated and educated person with an active, healthy lifestyle who is balancing work, life, and health.

LULU believes it has been able to effectively address the customer’s unique fitness and performance needs by incorporating style along with comfort and functionality. While its focus is women, LULU also designs products for men and female youth. Its ivivva brand focuses on activewear for girls. As part of the restructuring of its ivivva operations, the company closed 48 of its 55 ivivva stores in August 2017 with some being converted into lululemon stores. The seven remaining ivivva branded stores are in operation today and are not expected to close. ivivva is now primarily an e-commerce focused business.

Source: Lululemon Athletica

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