Lululemon Athletica Inc., a Canadian manufacturer of yoga clothing, announced on Thursday that it will close most of the Ivivva girl line stores, and the company’s first-quarter data exceeded analysts’ expectations. After the news came out, Lululemon's share price rose as high as 16% on Friday. The highest single-day stock price reached 56.85 US dollars to close at 55.78 US dollars per share.
Lululemon said it will close 40 Ivivva stores (currently a total of 55). Ivivva's girl business line will be adjusted to focus on e-commerce in the future. Eight of the remaining 15 stores will be replaced by the Lululemon brand; the remaining seven companies are still open, and they are the main link for customers in the North American market.
In addition, the company will also shut down all Iveva showrooms and reform its infrastructure. It is estimated that Ivivva's restructuring costs will be between 50 million and 60 million US dollars in 2017 (including the first quarter's 17.7 million US dollars).
Lululemon is known for its high-end casual sportswear sportswear, but in recent years, competitors have consistently introduced lower-priced sportswear to resist the growth of the former.
Lululemon CEO Laurent Potdevin stated that he is excited about the company's future growth strategy and that the restructuring of Ivivva will be the best direction for this part of the business.
As of April 30, Lululemon’s core data for the first quarter was as follows:
Adjusted diluted earnings per share were 32 cents, higher than the 27 cents previously forecast by Thomson Reuters analysts.
Sales revenue increased 5% year-on-year to US$520.3 million, which was higher than the previous forecast of US$514.1 million.
Same store comparable sales fell 1% year-on-year, but better than the previous forecast of a 1.9% decline year-on-year.
Operating profit of 45,400,000 US dollars, compared with the same period last year fell 21% over the same period;
When the CEO announced its annual data last year, the forecast for the first quarter of the fiscal year was "the slowing of the initial growth." Laurent Potdevin stated that starting from the first quarter, the company's sales exceeded expectations, mainly due to the sales of new product lines and fabrics exceeding expectations.
The company expects its net sales revenue in the second quarter to reach US$565 million, and comparable sales in the same store are expected to grow as low as mid-digits.
After the financial report was released, the company raised its profit forecast for the entire fiscal year 2017 from the previous forecast of $2.26 to $2.36 per share to $2.28 to $2.38 per share. However, the sales revenue forecast for the entire year was lowered from the previous 2.6 billion U.S. dollars to a maximum of 2.58 billion U.S. dollars, and comparable sales of the same store are expected to increase from low to medium single digits.
Lululemon's stock price usually undergoes major changes after the release of quarterly data. After releasing disappointing first-quarter data in March this year, the company's share price crashed more than 23% on the same day. The company said that the second quarter had begun to recover after a bad performance in the first quarter.
Omar Saad, an analyst at Evercore ISI, said that for consumers, the new product will help increase sales, which means that the Enlite series of high-end sports bras launched in May will be priced at US$98 (this price is almost ordinary Lululemon Two times the bra). Although this product is mainly sold online, it has become one of the company's best-selling bras. Enlite’s popularity shows that women are willing to pay extra for high quality innovative sportswear.
Some analysts warn that Lululemon needs to maintain its growth momentum in the face of declining Lululemon store turnover and increased competition from lower-priced competitors.
Susquehanna Financial Group analyst Sam Poser rated Lululemon's stock as "neutral." He believes that in order to get more new customers, physical stores are one of the main strategies. A feasible move is to add bolder products to male products and increase physical store activities (such as yoga classes) to attract passengers.
Andrew Burns, an analyst at DA Davidson & Co, believes that Lululemon is still a healthy brand, but the company’s efficiency has dropped from 1,897 USD in 2013 to 1,521 USD last year, which is a financial indicator that investors value very much. one.
He rated Lululemon's stock price as "neutral," on the grounds that in the face of intensified competition, the growth in store efficiency is unsustainable.
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