Lululemon (NASDAQ:LULU) Overcomes Recall Embarrassment, Increases Profit Forecasts

Lululemon Athletica Inc. (NASDAQ:LULU) has announced it’s first quarter fiscal 2015 results, and there was only good news for the Canadian retailer, with the firm reporting better than expected profit for the eighth quarter in a row.

Net revenue for the quarter rose to $384.6 million, an increase of 10% from last year.  Gross profit also increased, and is now at $205.9 million, an increase of 5% from the first quarter of the 2014 fiscal year.

There was an increase of 6% of total comparable sales, which includes both direct to consumer and comparable store sales.

The company now has a total of 316 stores and reported an increase in inventory. Inventory totaled $236.5 million, up from $180.4 million this time last year.

The forecast for full- year earnings and revenue were also raised, and shares have gone up by 3.4% to $63.61.

Lululemon Increases Revenue Estimates

Lululemon reported that it expects revenue for 2015 will be between $2 billion and $2.05 billion. This is an increase of $30 million over estimates released in March.

CEO Laurent Potdevin, is of the opinion the firms success comes from his team’s performance, stating “we drove positive trends in traffic, conversion, and brand engagement, along with a continued acceleration of our e-commerce business”. He is determined to oversee the firms continual  growth and said that the the plan is to strike “a strategic balance between strong growth and investments within innovation and infrastructure”.

Lululemon E-Commerce Business

The firm has been working hard to grow it’s online presence. Recently, online business has proven very profitable for the firm, and much of it’s revenue comes from online sales. Revenue from E-commerce increased by 27% during the first quarter of the year, which ended on May 3rd. In total, online business accounted for almost one fifth of the firms revenue, around $83.6 million.

Potdevin said the firm is committed to growing its online presence, and given how much E-commerce business has been booming, it’s difficult to see this trend slowing down. Effective management of the firms online affairs could also help increase awareness of the brand on an international level, another aim of the firm.

Huge Turnaround for Lululemon

Times were not always so good for Lululemon however, with a huge number of products being found to be defective in 2013. On March 18th of that year, store managers raised concerns that the material used in the yoga pants were far too thin, to the point they were basically see-through. As a result, the company recalled 17% of it’s yoga pants.

The firm said the problem was caused by by a fabric it called “Luon”, a mix of nylon and lycra. The fabric was used in three of the athletic clothing company’s product ranges. The products ranged from $72 to $98 and customers were offered a full refund for the defective goods.

The scandal was a huge embarrassment for the firm, as well financially damaging.

Since then the firm has been going through somewhat of a renaissance, and the difficulties of 2013 seem very long ago.

2014 was mostly spent recovering from the events of the year previous and the firm looks set to expand further in 2015. Efforts are being made to improve product quality and expand the product line, which now includes a huge variety of sporty clothing for both men and women. The company is also reported to be working hard to achieve faster international growth, and grow the brand abroad.

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Adam Green is an experienced writer and fintech enthusiast. He he worked with LearnBonds.com since 2019 and covers a range of areas including: personal finance, savings, bonds and taxes.


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