Lululemon again with growth but supply chain problems

Lululemon again with growth but supply chain problems

Canadian Lulemon Athletica (yoga inspired athletic wear) presented its last quarter under the guidance of CEO Christine Day shows again growth but certain supply chain problems are not yet under control. They will have again a dampening effect on results – as stated before – on the reminder of the ongoing year

The company has lowered its forecast for its fiscal quarter ending in October in a range of USD 370 to USD 375 million. As we know the problem results from the deficiency in the fabric of Luon, the black yoga pants, and to get them in the usual quality back to the shelves. The problems were leading to late deliveries of fall merchandise and left stores with only summer products to sell up the end of August, a situation that can’t be totally ironed out to the end of the year. The main bottleneck is localised in the commercialisation department shepherding a product from design to market. According to Christine Day Lululemon has to review every size of an item when it changes a pattern, fabric or manufacturer.  Another negative fact was that Luon’s fabric was delivered by only one manufacturer, now there is second source and a third one will be added early 2014.

Let’s have a look now on the reported thirteen weeks to August 4, 2013. The net revenue for the quarter increased 22 % to CND 344.5 million (CND 282.6 million), comparable stores sales increased by 8 % on a constant dollar basis. Direct to consumer revenue increased 39 % to USD 49.4 million, or 14.3 % (12.5 %)

Gross profit for the quarter increased 19 % to CND 186.0 of total revenues in the second quarter of fiscal 2013, but as a percentage of net revenue it decreased from 24.8 % to 22.9 %.

Income from operations increased 12.5 % to CND 79 million, but as a percentage of net revenue it decreased from 55.1 % to 54.0 %.

For the 26 months net revenue increased 22 % to CND 690.3 million (CND 586.3 ,million). Comparable store sales for the first two quarters increased by 8 % (on a constant dollar basis).

Direct to the consumer revenue increased 40 % to CND 103.4 million, or 15 % (13 %) of total company revenue.

Gross profit increased 14 % to CND 356.7 million, and the net revenue gross profit decreased from 55.1 % to 51.7 %.

Income from operations increased only one percent to CND 144.9 million, thus as a percentage of net revenue it declined from 25.2 % pot 21.0 %.

Christine Day, outgoing CEO, commented: “2013 continues to be the most important and most productive year in the company’s history. We have not only worked our way back from the black Luo9n setback, but have also added very talented people in important functions and have taken major steps forward on a number of key fronts, including the expansion of the international and men’s business, including many logistical initiatives”.

Lululemon entered also a global alliance with X-STATIC® with Noble Biomaterials . The partnership gives Lululemon exclusivity to use Noble’s XSTATIC® antimicrobial technology in Lululemon’s apparel. Noble has been a longstanding partner of the company, providing its X-STATIC® technology for Lululemon’s Silverescent® fabric since 2005.  This unique opportunity allows the company to innovate its technical product with X-STATIC® and secure the leadership position in “anti-stink” athletic apparel. X-STATIC®’s properties have helped Lululemon to set the industry standard by using the most powerful silver fabric technology in Silverecent® fabrics. It is made with 99.9 % pure metallic silver. X-STATOIC®‘s is designed to provide permanent odour protection by naturally inhibiting the growth of bacteria on the surface of the fabric. The silver fibre is woven directly into the garment and will not wash over time through laundering.

For the full fiscal 2013 revenues of CND 1625 million to USD 1635 million are expected.

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