Lululemon recorded strong Q1 sales growth

Lululemon recorded strong Q1 sales growth

Canadian yoga wear brand Lululemon Athletica has begun its new fiscal year with what analysts say is strong sales growth fuelled by the rise of online shopping and the opening of new stores.

Net revenue increased by 17% to $495.5m in the three months to 1 May, from $423.5m in the prior year quarter. Total comparable sales, which includes direct to consumer, grew 6%, while comparable store sales increased 3%.

The retailer opened 11 stores during the quarter and closed one, bringing the total number of stores at the end of the period to 373.

Earnings in the quarter dropped to $45.3m from $47.8m, while gross margin narrowed slightly to 48.3% from 48.6% last year. 

"We are pleased with our first quarter performance, delivering strong sales results and gross margin that exceeded expectations," CEO Laurent Potdevin said. "We finished the quarter with our inventory levels rebalanced and on track to achieve our goals for the year."

For fiscal 2016, the company expects net revenue in the range of $2.3bn to $2.34bn based on total comparable sales in the mid-single digits on a constant dollar basis. Diluted earnings per share are expected to be in the range of $2.08 to $2.18.

Neil Saunders, CEO of retail analyst Conlumino, noted: "Lululemon begins its new fiscal year in very much the same way it ended its last one: strong overall sales growth fuelled by the rise of online and the opening of new stores, with softer comparable growth.

"With the various things it is doing, Lululemon is striving to compete more effectively in a more challenging market. However, while we are confident that continued store openings and online growth can quickly drive top-line sales, we believe that the other initiatives will take a little more time to deliver through in terms of comparable sales and underlying profit."

Separately, the brand's founder has criticised the board for a second time after members held a "virtual" annual shareholder meeting via a voice-only webcast. 

Lululemon founder slams "unresponsive" company in second critique