It suffered a year ago in the recession, but tight times are no longer reining in business at Lululemon Athletica Inc., a high-end yoga wear chain.
Its new e-commerce site, which launched last spring with a limited array of goods, is now so popular that the retailer can't keep some items and sizes in stock. Third-quarter sales over all, which jumped 10 per cent at outlets open a year or more, were so brisk that some stores didn't have enough staff to serve customers.
For the fourth quarter, which includes the crucial holiday-shopping season, the company is forecasting that same-store sales - a key retail measure - will pick up in the "mid-teens." The chain is "cautiously optimistic" about the period, chief executive officer Christine Day said.
It took Lululemon "very little time to bounce back from the difficult business trends," Howard Tubin, an analyst at RBC Dominion Securities, said in a report before the retailer released its results late yesterday.
Lululemon did it by shipping new styles and colours to the stores weekly, blasting e-mails to customers about new products, and expanding beyond yoga wear to jackets and clothes for running.
It focused on its e-commerce site, which today carries its full range of products, and it invested early in the recession in a supply chain system that ensured it was able to track popular items so it could order more of them quickly and deliver them to stores.
And it refrained from heavy markdowns even as other retailers ran discounts to draw cash-strapped customers.
As an example of how one of Lululemon's strategies is playing out: A single new-product e-mail notification to customers can generate more than $6,000 of sales, Ms. Day said.
Still, Lululemon faces growing pains. It hasn't had enough staff in stores, which reflects poorly on its image of being customer-focused, Ms. Day said. It is now hiring more employees, which will add to costs.
And it is spending more to airlift popular merchandise to stores to get it there faster - rather than bringing it overseas by ship.
While yoga wear is still the company's core product, it is bolstering its jogging-wear offerings to make up 25 per cent of sales by next year, from "the low teens" today, she said. Its $58 jogging skirt, for instance, is "a runaway hit."
And it will open 25 new "showrooms" as temporary spaces to trumpet its products before launching permanent outlets in new locations, she said. It currently has 13 of these pop-up stores.
In another new effort, the company, which has 119 outlets, recently introduced a new athletic-store chain, called Ivivva, for girls aged 6 to 12. It's "a winning concept," based on the early performance of three stores, she said.
Longer term, Lululemon has to decide whether it wants to become a "multiconcept" retailer or, instead, push international expansion, Ms. Day said.
In its fourth-quarter, the chain expects earnings per share to be in the range of 26 to 28 cents, and revenue to be between $140-million and $145-million.
Lululemon (LLL-T)
Close: $29.24, up 74¢
Lululemon Athletica
Q3 / 2009 / 2009
Profit / $14.1-million / $8.8-million
EPS / 20¢ / 13¢
Revenue / $112.9-million / $87-million
All figures in U.S. dollars
Source: Company reports
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