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Lululemon Reaches a 'Turning Point' With Rise in Profits - Fashionista

Lululemon Reaches a 'Turning Point' With Rise in Profits

It's starting to focus on store growth in Europe and Asia.
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Lululemon designed uniforms for the Canadian beach volleyball teams, seen here on both Jamie Lynn Broder (in black) and Sarah Pavan (in red) in Rio de Janeiro. Photo: Patrick Smith/Getty Images

Lululemon designed uniforms for the Canadian beach volleyball teams, seen here on both Jamie Lynn Broder (in black) and Sarah Pavan (in red) in Rio de Janeiro. Photo: Patrick Smith/Getty Images

Lululemon's plans to double revenue to $4 billion by 2020 is still on track. On Thursday, the Canadian athletic retailer reported that in the three months ending July 31, net sales increased 14 percent to $514.5 million and, thanks to inventory control and better product margins, the gross profits gleaned from this sales period increased for the first time since 2014. CEO Laurent Potdevin said in the earnings webcast that the company is heading into the rest of 2016 in a "position of strength" and CFO Stuart Haselden called the last three months a "turning point." 

Profits were perked this quarter because Lululemon sold more high-margin categories, ran fewer markdowns and reduced product costs. Comparable sales increased by 3 percent, and according to Haselden, it would have been two points higher if the company had not adjusted to remove the effects of a warehouse sale last year. E-commerce saw comparable sales grow by 7 percent, and Lululemon is continuing to invest in its online business by extending a ship-from-store system to 65 stores by the end of the year. 

Potdevin also said the men's "ABC (anti-ball crushing)" line of pants and shorts continues to perform well, and the men's category as a whole saw mid-teens sales growth. In women's, textured tops with mesh, braiding or bonding and engineered prints also performed well, and bra and tank sales increased by 13 and 3 percent, respectively.

So, how will the retailer capitalize on this momentum? More stores. Lululemon opened six new stores this quarter, bringing the total of Lululemon Athletica and Ivivva Athletica locations to 379. That's 43 net new stores since last year, including four in Europe and three in Asia. Potdevin said the company is only getting started with its "global growth story," a key part of reaching that 2020 goal. The first store in Beijing will open later this year, and in China it already has three showrooms and a partnership with Alibaba. A second showroom will open in Japan, in Osaka. Two more London locations are planned including one on Regent Street, which will be celebrated in the fall with a collaboration with Central Saint Martins students. 

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